Property: London Lettings
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	Question

Baroness Gardner of Parkes: To ask Her Majesty’s Government, further to the Answer by Lord Ahmad of Wimbledon on 8 December (HL Deb, cols. 1593–6), what assessment they have made of the views of London residents about Clause 33 of the Deregulation Bill and the impact of the proposed changes to controls on London lettings on long-term residents.

Baroness Gardner of Parkes: My Lords, I declare my interests as recorded in the register.

Lord Ahmad of Wimbledon: My Lords, the Government published the discussion document Review of PropertyConditions in the Private Rented Sector on 12 February 2014. The document sought views from the general public on whether the relevant provisions of the Greater London Council (General Powers) Act 1973 should be reviewed or updated. The Government are carefully considering the representations we received, and a formal response to the consultation will be published shortly.

Baroness Gardner of Parkes: My Lords, I thank the noble Lord for that Answer, but I do not know why—and so I ask him why—the Government intend to take away London’s powers to have at least some control over this rapid subletting of short-term holiday accommodation. Under the new terrorism regulations, how are the obligations dealt with to ensure that people coming into such blocks of flats are not in any way unsafe for other local residents? Their behaviour when they are in the blocks certainly causes great danger, just on the local level of leaving doors open. Westminster Council has six officers working full-time on this, and they have never yet lost an appeal when they wished to enforce action.

Lord Ahmad of Wimbledon: My Lords, I note my noble friend’s concerns. I also wish to draw noble Lords’ attention to my interests in the register regarding leasehold properties. In response to her question, the Government’s intention is clear. We wish to use the Deregulation Bill to help reform what we believe to be the outdated provisions of Section 25 of the Greater London Council (General Powers) Act 1973. Londoners who want to rent out their homes for less than 90 consecutive days currently have to apply for
	planning permission. We believe that this does not apply anywhere else in the country, and this brings London in line with other parts of the country. As to her concerns about terrorism and other such acts, of course the provisions and the ability of the police, the local authority and local residents to intervene will still be very much available. We have introduced new safeguards under the Anti-social Behaviour, Crime and Policing Act 2014, which came into force in November last year.

Baroness Donaghy: My Lords, the Minister will be aware that when the current legislation was introduced in 1973, it was to protect permanent accommodation. Today, we have a housing crisis, an increase in short-term lets and a threat to permanent housing stock. Why are the Government intent on making a bad situation worse?

Lord Ahmad of Wimbledon: The noble Lady referred to my recall of 1973. I was but a toddler then, but I have certainly read up on it. Let me assure her that the purpose behind the Government’s proposals is not in any way to reduce the housing stock, but to allow Londoners who are home owners and wish to put their properties up for rent on a short-term basis of up to 90 days to do so, without the need for increased bureaucracy. The measure will amend Section 25 to permit regulations that allow genuine householders to supplement their income by renting out their property. As to London’s housing shortage, I of course recognise the importance of London homes for Londoners, and the change will not remove the protection available in Section 25.

The Earl of Lytton: I am sure the Minister would agree with me that the sort of occupation that would be facilitated by aspects of the proposed relaxation effectively becomes a form of commercial activity, and is treated as such for many regulatory, safety and taxation purposes. Would he not agree with me that, given the implications for the safety and amenity of regular residents, this matter is a proper concern of the development and building control functions that are exercised on a case-by-case basis on behalf of the community by the local authority?

Lord Ahmad of Wimbledon: My Lords, I assure the noble Earl that the Government have clarified that they intend to use the regulation-making power only to allow residents to let their homes on a short-term, temporary basis, such as when they are on holiday, without the need for planning permission. It is not intended to be used on a permanent or commercial basis. On the concerns that the noble Earl expressed, there will of course be safeguards. As he may be aware, provision will be made in the legislation for exemptions for areas and particular types of accommodation, which will be subject to review. Finally, I assure the noble Earl that we are working with local authorities, particularly those that have expressed concerns, to ensure that regulations provide the correct balance by allowing the kind of short-term letting that we wish to see while keeping the safeguards in place.

Baroness Grender: My Lords, does the Minister agree that for many tenants there remains a significant risk of eviction when asking landlords for entirely reasonable repairs? Does he therefore welcome the amendments from these Benches to the Deregulation Bill, which reflect Sarah Teather’s Private Member’s Bill on revenge evictions, which sadly did not make progress in the other place?

Lord Ahmad of Wimbledon: My noble friend makes an important point. She will be aware that the Government have looked the issue of evictions carefully and we are generally supportive of the provisions in the Private Member’s Bill introduced by Sarah Teather. We will look carefully at that Bill to ensure that the correct provisions are made when this comes into legislation, but I share the sentiments and concerns that my noble friend has expressed.

Lord McKenzie of Luton: My Lords, the consultation that the Minister referred to ended last February, almost a year ago. Why have the Government taken so long to respond to it? If they claim to be in favour of localism and if they are intent on deregulating short-term lets, why should not London local authorities have the right to determine the extent, if at all, to which this deregulation runs in their areas?

Lord Ahmad of Wimbledon: As the noble Lord will be aware, we are working closely with London’s local authorities. As a former member of a London local authority, I can assure him there is differing opinion between those boroughs within the central part of the capital city and those further afield. As I said earlier, it is important that we strike the right balance. I assure the noble Lord that we are working with local authorities in London to ensure that the balance we strike is right. We are working in conjunction with them to ensure that the provisions are in the interests both of residents who choose to let their homes and of those who choose not to.

Baroness Hooper: My Lords, in his answers, my noble friend the Minister has referred to resident home owners letting on short lets. How does this apply to non-resident home owners? I appreciate that this is perhaps a particular problem in London, which suggests to me that London should be made a special case.

Lord Ahmad of Wimbledon: My noble friend makes an important point about non-residents. We have made provisions such that, for any non-resident seeking to take advantage of selling their property, there will capital gains tax and repercussions in that regard.

Economy: Prosperity of Towns
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	Question

Lord Greaves: To ask Her Majesty’s Government what proposals they have for promoting the economic prosperity of towns that do not form part of city regions.

Lord Greaves: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I remind the House of my interest as a member of an urban local authority in a non-city region area.

Lord Ahmad of Wimbledon: My Lords, the Government’s long-term economic plan is already securing a better future and a stronger economy for our country. We have put in place a range of tools and incentives that give communities the freedom and flexibility that they need to drive economic growth. Growth deals build on the success of city deals and mean that every area of England, rural or urban, can benefit from powers and funding devolved from Whitehall.

Lord Greaves: My Lords, that Answer from the Minister sounds very nice, but the reality is that people in those parts of England that do not form part of big city regions—particularly, for example, those in the north of England that are not within the aegis of a handful of large authorities—feel very much as if they are being left in limbo when it comes to the devolution of power and the provision of resources to local authorities. Areas such as west Cumbria, east Lancashire —where I live—and many others feel left in limbo. Does the Minister understand that?

Lord Ahmad of Wimbledon: I am always pleased when my noble friend feels that I am being nice. Let me assure him that this is not about leaving any authority in limbo. The 39 growth deals that have been agreed thus far, and the additional funding for growth deals announced by my right honourable friend the Chancellor of the Exchequer in his Autumn Statement, will ensure that all authorities across the country can apply and can successfully bid for such growth funds. Indeed, Lancashire LEP has already secured £233.9 million from the Government’s local growth fund, which it estimates will create up to 5,000 jobs for the local area, and 6,000 new homes as well.

Lord Wills: My Lords, the Minister has just referred to the Autumn Statement. He will be aware that there is a widespread belief that the spending decisions in that Statement were driven at least as much by electoral considerations as by economic considerations. Will the Government now publish the details of the assessments of all the projects that competed for that funding, so that people can make up their own minds about how those decisions were taken?

Lord Ahmad of Wimbledon: Let me assure the noble Lord that this Government put the economy first, and indeed we are achieving success in that regard —I am sure that he appreciates that. As for the announcements on the second bid, I ask him to show a little patience, as we will be announcing those very shortly.

Lord Naseby: Is my noble friend aware that in England’s largest town, Northampton, economic prosperity is happening? The university on two campuses
	is now provided with a nice new site on the river, there is a new railway station and a new innovation centre. The local authority, which happens to be Conservative controlled, and the leader of that authority are providing true leadership. None of that would be possible had that authority not been supported by Her Majesty’s Government, and in particular by Her Majesty’s Treasury.

Lord Ahmad of Wimbledon: I totally concur with my noble friend. I could not have put it better myself.

Lord McKenzie of Luton: My Lords, one of the acknowledged challenges of supporting growth, whether for city regions or otherwise, is the allocation of funding in what the noble Lord, Lord Heseltine, called “penny packets”. LGA research has shown that central government funding for growth has become even more fragmented, with the number of funding streams now having doubled since the noble Lord’s report. The LGA found that there are 124 funding schemes for local growth, spread across 20 government departments, amounting to £22 billion. On what basis does the Minister claim that this is providing value for money, and how is the related bureaucracy helping SMEs in particular to access support?

Lord Ahmad of Wimbledon: The noble Lord should look at the facts. My noble friend Lord Heseltine has been working very closely with the Government, but I can do no better than cite an area that the noble Lord, Lord McKenzie, knows well. In Luton, there has been a successful LEP initiative on growth funds—with Woodside Link, Bedfordshire, the building of the new link road in Houghton Regis will enable major employment growth and help reduce congestion north of Luton. The noble Lord need look no further than his own town, where he will see the benefits and the results of the Government’s schemes.

Baroness Farrington of Ribbleton: My Lords, would the Minister care to comment on the disproportionate allocation of resources and capacity for growth for many of the areas in the north of England, both the north-west and the north-east? This Government are disproportionately favouring his noble friends’ sort of areas at the expense of local authorities such as Preston and Lancashire. Does he agree that one of the most effective things for enterprise is for the local authority to ensure that it can match funding to make areas places that people want to live in, with decent services?

Lord Ahmad of Wimbledon: Suffice it to say that I do not agree with the noble Baroness. The local growth funds have demonstrably shown success up and down the country. I quote:
	“Reaching this landmark deal is a real demonstration of central government’s confidence in our economic potential”.
	That is from Edwin Booth, the chair of the Lancashire local enterprise partnership. Last time I checked, that was not down south, where the noble Baroness asserts that some of my noble friends may be.

Lord Teverson: My Lords, what mechanisms do the Government have to allow non-metropolitan local authorities that want to move ahead and work with neighbouring local authorities cost-effectively to move towards greater devolution? Is a channel for them to achieve that open now?

Lord Ahmad of Wimbledon: The essence behind local growth funds is exactly as my noble friend says. It is about empowering people at a local level: local enterprise partnerships, local councils and local businesses coming together to bid for local funds. Demonstrably, the 39 deals agreed thus far—and the new deals that we will be announcing—will reflect exactly what my noble friend seeks to achieve, which is local communities working together to achieve growth and jobs for their local area.

Lord Clark of Windermere: My Lords, does not the Minister realise that the noble Lord, Lord Greaves, reflects a view held especially in Cumbria and the north-east of England that, although they support the city regions, they feel left out, especially when the major infrastructure investment, HS2, stops 100 miles to the south of Newcastle and Carlisle in Manchester and Leeds? We will end up with a worse transport service, not a better one.

Lord Ahmad of Wimbledon: We all await the outcome of HS2. I believe that it will be positive for the country and, indeed, for the north. My right honourable friend the Chancellor of the Exchequer has already shown the Government’s commitment in the announcement that he has made in support of the regions across the country, and I am sure that if the noble Lord awaits the outcomes of the second bidding round, some of his concerns will be addressed.

Disabled Students’ Allowance
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	Question

Lord Addington: To ask Her Majesty’s Government whether any reform of Disabled Students’ Allowance will take full account of the case for encouraging independent learning and study for eligible students.

Lord Addington: My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and draw the House’s attention to my declared interests.

Baroness Williams of Trafford: The Government support the case for encouraging more independent study. In future, we expect higher education institutions to consider a more inclusive learning environment as part of their provision of support for disabled students, and our reforms support that.

Lord Addington: I thank my noble friend for that Answer. However, does she agree that at the moment the sector is very worried about what is coming, as it is
	seen as a cost-cutting exercise? If there were a clear statement that independent learning were to be at the heart of all the changes, it would to some extent head this off and give clarity of direction to the ongoing discussion.

Baroness Williams of Trafford: I understand that any change afoot will engender some sort of worry, but the DSA has not been reformed for several years now. We need to improve value for money within the system and balance the responsibility to disabled students between government and higher education institutions, and to make DSA sustainable, because it is a demand-led provision.

Baroness Uddin: My Lords, given the communication difficulties associated with autism, the withdrawal of study assistance with human support could prove disproportionately detrimental to a student on the autism spectrum. What consideration have the Government given to the impact of their reform on students with autism spectrum disorders, the characteristics of which are not considered in the equality impact assessment?

Baroness Williams of Trafford: Dyslexia support is one of the highest funded considerations under the DSA. The noble Baroness referred to non-medical help. There is absolutely no intention to cut that support, but there will be more responsibility on higher education institutions to embrace that assistance because of their duties under the Equality Act 2010.

Baroness Grey-Thompson: My Lords, I declare an interest as a trustee of the Snowdon Trust, which provides financial support to disabled students. I wonder whether any reform of DSA could also look at providing equal support for postgraduate students. When disabled students move from undergraduate to postgraduate level, the current maximum support drops by 50%, thus preventing some of our brightest and most talented disabled students from reaching their academic potential.

Baroness Williams of Trafford: The noble Baroness makes a valid point. Postgraduate funding is indeed less than undergraduate funding. How the reforms will exactly pan out has been under consultation and the Government will shortly provide guidance to institutions. I hope the noble Baroness has made that point during the consultation process.

Lord Stevenson of Balmacara: My Lords, under the new arrangements, each individual student will have to negotiate the package of measures they get from their university. In contrast to what happens at present—where there is a statutory framework—there will be no overarching arrangements. What happens when things go wrong? Who will have rights in this matter and where will the statutory rights be located?

Baroness Williams of Trafford: In terms of recourse if things go wrong, there are two directions in which a student can turn. The first is the Office of the Independent
	Adjudicator. The second is the exceptional case process, the format of which is under consideration and will be announced shortly.

Baroness Brinton: My Lords, I follow on from the previous question. How will universities be held accountable to make sure that they are providing the appropriate support under the revised arrangements? Will there be a national benchmark to check that a minimum standard is being provided for students with certain conditions?

Baroness Williams of Trafford: My Lords, the universities—certainly those on the higher fee band—will have to put in place access agreements, which will be monitored by OFFA. As I say, there will also be the appeals process and the Office of the Independent Adjudicator to ensure that these reforms roll out smoothly.

Climate Change: UN Conference
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	Question

The Lord Bishop of St Albans: To ask Her Majesty’s Government what assessment they have made of the agreement reached at the United Nations climate change conference in Lima in December 2014.

Baroness Verma: My Lords, we secured the basis for everything that the UK Government want in the final agreement. We agreed that countries’ emissions reductions contributions must represent a progression on their current level of effort and be accompanied by information to facilitate understanding. We made progress in elaborating elements of the draft negotiating text and achieved a good result on climate finance by leveraging the UK’s leadership to help get more from other countries.

The Lord Bishop of St Albans: I thank the Minister for her Answer. I know that many people were very disappointed at the outturn of the talks. Is she aware of the little booklet produced by the Royal Society, A Short Guide to Climate Science, which assesses some of the scientific evidence and answers some of the concerns of those who believe that this is not a significant problem for us today? Can she assure the House that Her Majesty’s Government will give a bold moral lead among the international community as we prepare for the talks in December in Paris, so that we can get a significant breakthrough later in the year based on this solid scientific evidence?

Baroness Verma: My Lords, the right reverend Prelate is absolutely right that we need to show leadership. I am aware of the Royal Society’s recent publication A Short Guide to Climate Science and very much welcome its conclusions. It is an excellent and highly accessible summary of climate science and I recommend
	that those who are interested in the subject should read it. I would also like to assure the right reverend Prelate that this Government are absolutely committed to taking the lead and securing a science-led, binding agreement in Paris in December. We have worked very hard to ensure that other countries are working with us.

Viscount Ridley: My Lords, given that the heart of the Lima agreement was merely “an invitation” for countries to define a carbon dioxide reduction target and that “may” was substituted for “shall” throughout the key text, does my noble friend think that sending a delegation to Lima was really worth all that money and aviation fuel? I declare my energy interests as listed in the register.

Baroness Verma: My Lords, I am always grateful for my noble friend’s interventions. I reassure him that to try to bring so many countries from across the globe to a meeting to discuss a point which currently affects us all is most important. Given that we know that sea levels are continuing to rise, polar ice continues to melt and we have increased global temperatures, we need to bring people to the table to discuss such important matters.

Baroness Worthington: My Lords, I am encouraged to hear that the Minister thinks that we need to increase current levels of effort. As noble Lords will be aware, we negotiate in climate talks as the EU, and the EU is currently on track to comfortably exceed its current targets. Does the Minister agree that to unlock ambition, it might be time for the EU to review—and be prepared to increase—its 2020 target, which we may meet as early as this year?

Baroness Verma: My Lords, the noble Baroness is right that we need to ensure that ambition is always at the heart of what we do. However, we need to make sure that the rest of the world is coming with us so that we all remain competitive as well. Although the noble Baroness is right that we keep raising our ambitions, we need to make sure that others’ ambitions are raised as well.

Lord Teverson: My Lords, one of the interesting developments at Lima was the inclusion of a paragraph, in the document to go forward to Paris, saying that the use of fossil fuels should be ended globally by 2050. Do the Minister and the Government welcome that thought which was put forward and promoted very much by the Catholic Church? Is that not a good second bow to the very dry climate-change targets that we have at the moment, important as they are, and a really positive way to go forward?

Baroness Verma: I am extremely grateful to my noble friend for raising an important point. We are weighing up the position of developing and developed countries in trying to get on to the same trajectory, so we need to be sure about the impacts there will be on the developing nations as well as the developed ones.
	We need to encourage everyone to be less dependent on fossil fuels and to do much more on the renewables sector.

Lord McFall of Alcluith: My Lords, Lima did make progress although it also leaves a lot to the imagination. The key is the Paris conference, and as the right reverend Prelate said, that will demand moral leadership. Will the Government therefore endorse the approach of Pope Francis, who will not only address the UN on this subject in 2015 but produce an encyclical to be read at every Catholic church in the world, urging everyone that it is their responsibility to take action on a moral and a scientific basis?

Baroness Verma: The noble Lord raises a very important point—that it is an individual responsibility for us all to take. Collectively, that is what Lima managed to do—to bring countries around the table to move forward on the contributions they will make. I agree with the noble Lord that we need to look at it both as individuals and as countries. The Pope and many other leaders across the globe are taking climate change issues very seriously, and I am really pleased that it is now on the top of most agendas.

Lord Vinson: My Lords, whatever the Government decide, does the Minister agree that it is important that the measures taken should have a measurable effect on world CO2 levels and that we do not put our efforts into things that are merely tokenist? To that first end, will the Minister assure the House that the Government are looking seriously at the development of small, modular nuclear reactors, which are inherently safe, can be factory built and cost a fraction of what the main, larger nuclear plants currently cost? That would ultimately give us endless forms of electricity, totally CO2 free.

Baroness Verma: My noble friend raises another very important point—that we need to look at a diverse range of energy sources, as we do. The Government are always looking at how to ensure that we have the most efficient and cost-effective measures in place to deliver secure energy to all people all the time.

Lord Rooker: While we are on the subject of morality, can the Minister explain to the British public, whose support is required, the morality of the ludicrous position of paying tens of millions of pounds to the owners of wind turbines in order to stop them producing electricity? It is ludicrous and will lose public support for many measures relating to climate change.

Baroness Verma: My Lords, it has always been the case, even under the previous Government, that when there is spare capacity it is cut off and the providers are paid for it. It is nothing new; I have not brought anything new to the table, and the noble Lord is not raising anything new. He might have an aversion to wind farms, but this has always been done, even under his Government.

Lord Cormack: The fact that it is not new does not mean that it is not stupid.

Lord Avebury: My Lords, has my noble friend looked at the study by Oxford University’s department of engineering which showed that the development of tidal power in the Pentland Firth could supply 42% of Scotland’s electricity? Will she therefore encourage the development of these resources and promote them in other parts of the United Kingdom?

Baroness Verma: My Lords, I know that we have steered slightly away from the Question on the Order Paper, but I suggest to the noble Lord that this Government are looking at all types of energy to ensure that we have a diverse mix of energy so that we are not dependent on having to bring energy from abroad but can supply our own energy at a cost-effective rate to the British public.

NHS: Accident and Emergency Services
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	Statement

Earl Howe: My Lords, I shall now repeat as a Statement the Answer to an Urgent Question given in another place by my right honourable friend the Secretary of State for Health on major incidents and A&E performance in hospitals. The Statement is as follows.
	“Mr Speaker, I welcome this opportunity to come to the House and make a Statement on accident and emergency services.
	First, we must recognise the context. The NHS always faces significant pressures during the winter months, but with an ageing population we now have 350,000 more over-75s than four years ago. As a result, we are seeing more people turning up at our A&Es, with 279,000 more attendances in quarter 3 of this year compared to last and a greater level of sickness among those who arrive, leading to an increase in emergency admissions of nearly 6% on last year. This picture is reflected across the home nations, with A&Es in Wales, Scotland and Northern Ireland all missing key performance standards as a result.
	A number of hospitals have declared major incidents over the past few days in what is traditionally a particularly busy time in A&E. A major incident is part of the established escalation process for the NHS and has been since 2005. This enables trusts to deal with significant demands, putting in place a command and control structure to allow them to bring in additional staff and increase capacity. It is a temporary measure taken to ensure that the most urgent and serious cases get the safe, high-quality care they need.
	The decision to declare a major incident is taken locally, and there is no national definition. We must trust the managers and clinicians in our local NHS to make these decisions and support them in doing so by making sure that there is sufficient financial support available to help deal with additional pressures. I chaired my first meeting to discuss that support on
	17 March last year. On 13 June, we gave the NHS an additional £400 million for winter pressures, topped up in the autumn by £300 million to a record total of £700 million, ensuring that local services had the certainty of additional money and time to plan how it should best be used. The NHS started this winter with 1,900 more doctors and 4,800 more hospital nurses than a year ago. This planning and funding has been widely welcomed by experts in the system, including NHS England, NHS providers, the College of Emergency Medicine and the NHS Confederation.
	The funding that the Government have put in, which is on top of the year-on-year real-terms increases in funding, is made possible by a strong economy and will pay for the equivalent of 1,000 more doctors, 2,000 more nurses and 2,000 other NHS and care staff, including physiotherapists and social workers. It will fund up to 2,500 additional beds in both the acute and community sectors and provide £50 million to support ambulance services.
	However, the NHS also needs longer term solutions to these pressures. We are providing £150 million through the Prime Minister’s Challenge Fund to make evening and weekend GP appointments available for 10 million people, with over 4 million already benefiting from this. Our better care programme integrates, for the first time ever, health and social care services in 151 local authority areas, with plans starting in April to reduce emergency admissions to hospitals on average by 3%. We have funded the NHS’s own plan to deal with these pressures, the five-year forward view, with an additional £1.7 billion for the NHS in 2015-16 and £1 billion of capital over the next four years to improve primary care facilities.
	Let me finish by thanking hard-working NHS staff across the country for the outstanding care that they continue to deliver under a great deal of operational pressure”.
	That concludes the Statement.

Lord Hunt of Kings Heath: My Lords, I join the Minister in paying tribute to the staff of the NHS who are facing such a pressurised situation at the moment. Does he accept that, for all the actions that he has listed today, the fact is that too many vulnerable people are currently being exposed to too much risk in the NHS as a result of the crisis in A&E? How many hospitals have declared major incidents in the past two weeks? Does he agree that the crisis has been caused principally by the savage cuts in social care and the chaos caused by NHS reorganisation? Why have the Government overseen the closure of dozens of NHS walk-in centres? Why did the Government oversee the replacement of qualified NHS nurses in NHS Direct by unqualified call-centre staff in NHS 111, who have computers programmed to encourage people to go to A&E? When will the Government get a grip?

Earl Howe: My Lords, the noble Lord will understand that I am under instructions to keep my answers brief, in the nature of Urgent Questions. To cover his main points, though, we have made social care a priority at the same time as protecting the NHS budget and
	reducing the deficit. Since 2010 we have allocated additional funding from the NHS each year to support social care worth £1.1 billion in the current year and £2 billion next year. With regard to walk-in centres, there is no evidence that the closure of those centres, where that has occurred, has resulted in additional A&E attendances. A Monitor report in 2013 found that closures were often part of reconfigurations to replace walk-in centres with urgent care centres co-located with A&Es. On NHS reorganisation, I simply point out to the noble Lord that the pressures that we are seeing in the English health service are replicated just as strongly in the NHS in Wales, Scotland and Northern Ireland. Our A&E departments are in fact coping even better than those in the devolved Administrations.

Lord Tebbit: My Lords, I wonder whether my noble friend will give consideration to helping those people who could not get appointments to see their general practitioners, some of whose surgeries were closed for five days over Christmas, by allowing or encouraging hospitals to set up general practices alongside their A&E departments, which would be open seven days a week, 24 hours a day, for people who registered at the hospital general practice. That would mean more funds for the hospital and less funds for the general practices that chose to close up in that manner.

Earl Howe: My noble friend has made an extremely important point. I have visited hospitals where that very model has been in place, for example, in Luton, where I went not so long ago. More and more hospitals are adopting this suggestion so that when people turn up at A&E they can be triaged immediately into urgent and less urgent cases, often to be channelled through to the GP service.

Lord Kinnock: I endorse the sentiments just expressed by the noble Lord, Lord Tebbit, unusual though that may be. I ask the Minister to commend those hospitals and health authorities that have introduced GP services as part of their A&E emergency response. I also draw his attention, if he has not seen them already, to the statements of the Royal College of Nursing and the College of Emergency Medicine? Both said emphatically that a substantial part of the reason for the present pressures is the effect of the reduction of local authority funding which means, in the words of one of the college leaders, that there is no community care. That has meant that people have to be accommodated in hospitals who would otherwise be in either their own homes or local authority homes. Is it not the case that the savage cuts imposed on local authorities, which have had a direct impact on commitment to care for the elderly especially, are to blame for a substantial part of this crisis? Will the Government consider, in addition to NHS funding, reversing at least some of those cuts?

Earl Howe: My Lords, I thank the noble Lord for his endorsement of the model which my noble friend proposed for GP presence in or alongside A&E departments. I fully agree with him on that. It works
	well. As regards local authority funding, social care expenditure, in particular, has decreased over the past three years. Obviously that has had an effect on the NHS. It would be idle to pretend that it has not. However he will know the very constrained funding environment in which we stand, and I understand that the party opposite has not undertaken to reverse the reductions in funding to local authorities for understandable reasons. That means that we have got to think clever, and one of the initiatives that we are launching next year is the better care fund which will bring together the NHS and social services in a meaningful way. By far the lion’s share of the funding in the better care fund will go to social services.

Baroness Barker: Since 2010 there has been an average decrease in social care funding in local government of 26%. Are the Government tracking the coincidence of reductions in budgets for things such as continuing care beds and increased attendance at A&E?

Earl Howe: The impact of reductions in social care expenditure is not, I am afraid, entirely clear. I wish it were, because more people are now outside the formal care system. However, outcomes for service users within the formal care system have held up over the period.

Baroness Finlay of Llandaff: Can the Government confirm that they are working with the College of Emergency Medicine—and I declare an interest as a fellow of that college—to manage their STEP programme? It requires sustainable staffing levels within emergency medicine departments, renegotiation of the tariff to make sure that they are adequately funded and dealing urgently with exit block. The college has calculated it would free 20,000 bed days if delayed discharges from the rest of the system were able to happen on time. The ‘P’ of course is for primary care co-location which has already been addressed. Does the Minister recognise that these departments are working incredibly hard? Although people are waiting longer, by and large they are managing to protect outcomes for individuals who are severely ill and who are seen.

Earl Howe: I am grateful to the noble Baroness. It is worth observing that while the standard is that 95% of people arriving at A&E should be seen and treated within four hours, that standard has not been met in recent weeks. Nevertheless, on average, hospitals are seeing and treating around 90% of patients. The department is working closely with the College of Emergency Medicine. Indeed, I have the college’s paper in front of me. I am well aware of the issues that it has identified, but it is worth noting that the college says that the latest figures show that in England hospitals and their staff have coped extraordinarily well.

Baroness McIntosh of Hudnall: My Lords, can the Minister confirm that staffing, particularly of emergency medicine doctors, is acute in the sense that probably enough are being recruited but not enough are being retained in emergency medicine and that there is a significant loss of those qualified practitioners overseas? What is being done to address that?

Earl Howe: I recognise that issue. Having said that, we currently have a record number of A&E doctors in the NHS, which is good, and across the system we have 1,800 more doctors and 4,700 more hospital nurses than we had a year ago. However, being an A&E doctor is a stressful occupation, and doctors are sometimes tempted to go overseas. We are concerned about the loss of any A&E doctor, and that is being looked at in conjunction with the royal colleges and the BMA.

Baroness Knight of Collingtree: My Lords, there can be no doubt that the figures which we have been given by the Minister need to be looked at very carefully. It would be a miracle if this enormous demand could be faced with no financial troubles at all. However, does he recognise that there is quite a bone of contention, and that the argument is building up that those who bear the heat and the burden of the day working in A&E departments seem to get a fairly small salary compared to the enormous sums that are paid out to managers within the health service? I do not know whether it would be possible to rein that back a little, but if that is the case, it seems very unfair.

Earl Howe: I am grateful to my noble friend. Of course, rates of pay are a sensitive matter, and it is true that the constraints on pay rises over recent years have had an effect on the attractiveness of particular careers in the health service. We can do little about that in the short term, but there are ways and means of improving the work-life balance and working lives of those who work in the health service, even if we cannot increase their pay at the current time.

House of Lords (Expulsion and Suspension) Bill [HL]
	 — 
	Third Reading

Bill passed and sent to the Commons.

Stormont House Agreement
	 — 
	Statement

Baroness Randerson: My Lords, with the leave of the House, I will now repeat a Statement made earlier today by my right honourable friend Theresa Villiers, the Secretary of State for Northern Ireland. The Statement is as follows.
	“I would like to make a Statement on the political talks in Northern Ireland which culminated in the Stormont House Agreement on 23 December. When I last updated the House after the visit to Belfast of my right honourable friend the Prime Minister and the Taoiseach, Enda Kenny, I reported that 10 weeks of talks had so far failed to deliver consensus on any of the key issues. I made clear that the stakes over the coming days were high and that without an agreement before Christmas we were unlikely to get so close again for months, or even years.
	Further intensive discussions duly took place on Wednesday 17 December and continued on Thursday and Friday of that week. Resuming on Monday 22 December, negotiations continued overnight, concluding some 30 hours later at around lunchtime on the 23rd. At that stage, we presented the parties with a final heads of agreement, reflecting many weeks of discussion and with the input of both the UK and Irish Governments, in accordance with the three-stranded approach. Key issues covered included the finances of the Stormont Executive, reform of the devolved institutions, and the legacy issues of flags, parading and the past. I will take each in turn.
	The agreement sets a path for the Executive to put their finances on a sustainable footing for the future, averting the impending budget crisis which was threatening the stability and credibility of the devolved institutions. That includes the implementation of welfare reform, with certain agreed adaptations paid for out of the Northern Ireland block grant, alongside efficiency measures and reforms to the public sector. Measures to improve the way the devolved institutions work, including provision for an official Opposition, a reduction in the number of government departments, and a cut in the number of MLAs by 2021 are also part of the agreement. A commission on flags, identity and culture is to be established by June and, based on the party leader discussions in the summer, proposals are set out by the Government which open the way for a devolved system of adjudicating on parades, to replace the Parades Commission.
	Crucially, the agreement also sets out broad-ranging new structures to deal with the legacy of Northern Ireland’s past. These include an oral history archive, a new historical investigations unit to look at the deaths that occurred as a result of the Troubles, and an independent commission for information retrieval established by the UK and Irish Governments. All of these bodies are required to operate in a fair, balanced, proportionate, transparent and accountable way, preventing any group or strand of opinion from being able to subvert the process or try to rewrite history.
	The new system puts the needs of victims and survivors centre stage and has reconciliation as a key goal. Consensus on how to deal with Northern Ireland’s past has eluded successive Governments since the Belfast agreement was signed 17 years ago, so the significance of the progress which has been achieved should not be underestimated. The Government have agreed to contribute £150 million over five years to help fund the structures dealing with the past, meaning that the PSNI can devote its efforts to policing the present rather than the past. That funding forms part of a wider package of significant financial support from the Government amounting to £2 billion of additional spending power. That is made up of a combination of new funding and important flexibilities in relation to existing resources and it is targeted at Northern Ireland’s specific circumstances—the legacy of its past, its divided society and its overdependence on the public sector.
	Last, but certainly not least, the agreement paves the way for legislation to devolve the power to set the rate of corporation tax for Northern Ireland. A Bill will be presented to the House shortly for First Reading.
	If the Stormont parties press ahead on agreeing their final budget and on delivering welfare reform legislation, the Government will use all their best endeavours to get the legislation on to the statute book before Dissolution. The parties in Northern Ireland have made it clear that corporation tax devolution can help them to rebalance the economy and attract investment because of Northern Ireland’s unique position of having a land border with the Republic of Ireland. I welcome the fact that it is this Government who are delivering that momentous and transformative change, subject to the important conditions contained in the agreement, and I call on the Opposition today to commit to supporting the Bill as a key part of the Stormont House agreement.
	The agreement involves compromise on all sides. It is fair and balanced and it has been widely welcomed. First Minister Peter Robinson hailed it as “a momentous step forward”. Deputy First Minister Martin McGuinness described it as “a remarkable achievement”, and,
	“a fresh start we need to seize with both hands”.
	President Obama said that Northern Ireland’s political leaders have shown that,
	“there is a way to succeed for the benefit of all”,
	and Secretary of State Kerry called their actions “statesmanship, pure and simple”. But securing an agreement is not the end point—far from it. There is much work ahead on implementation for the Executive, for the UK Government and, where appropriate, for the Irish Government. However, I give this assurance: if the parties in the Executive press ahead on that, the Government will implement our side of the agreement and we will do it faithfully and fairly. There are no side deals.
	In closing, I pay tribute to Minister Charlie Flanagan for his crucially important contribution to the process. I would also like to thank the US Administration, and in particular Secretary Kerry’s special representative, Gary Hart, for their support. I thank all the officials at the Northern Ireland Office who worked on this process. Above all, I would like to record my appreciation for the leadership provided by the five Northern Ireland Executive parties.
	In the Government’s view, the Stormont House agreement represents a genuine and significant step forward for Northern Ireland, offering the prospect of real progress on some of the most intractable issues we face there—problems that have defied multiple attempts to resolve them over the years. The agreement gives the five parties in the devolved Executive the chance to refocus and work together with renewed confidence for a more prosperous, more stable, more united and more secure future for the people of Northern Ireland. I urge them to seize the opportunities it presents to build a brighter future for Northern Ireland, and I commend the agreement to the House”.

Lord McAvoy: My Lords, first, I thank the Government for making advance sight of the Secretary of State’s Statement available to us. Her Majesty’s Opposition welcome many aspects of the agreement that the Minister has outlined to the House. It is not perfect, but it is a genuine advance on the stalemate of
	the past two years. We congratulate the Secretary of State, the Parliamentary Under-Secretary of State and her counterparts in the Irish Government on their painstaking and, I am sure, at times painful facilitation of the talks.
	Throughout the political impasse of the past two years, we have repeatedly called for a more active role from the Government. We hope that the right lessons have now been learnt about the consequences of disengagement for political stability and momentum in Northern Ireland. I am sure that the Minister will agree that there is no room for complacency. As we have seen in the recent past, unresolved issues such as parades and flags have the potential to fuel public concern and disorder, and therefore ultimately lead to political instability.
	Her Majesty’s Opposition also pay tribute to Northern Ireland’s political leaders for stepping back from the abyss and restoring some level of public confidence in their capacity to move Northern Ireland forward. It is acknowledged that they face unique challenges in managing the transition from a society scarred by conflict and sectarianism to a normal society. However, this acknowledgment does not mean exemption from difficult political choices about priorities, or any expectation of blank cheques from this or any future Westminster Government.
	Turning to the agreement itself, Her Majesty’s Opposition welcome the adoption of a viable budget for the next financial year. It is right that this includes some elements of welfare reform while excluding the pernicious bedroom tax, which an incoming Labour Government will scrap.
	However concerns remain about the Government’s rush to introduce legislation on corporation tax devolution, a decision that will have profound implications for Northern Ireland and the rest of the United Kingdom. There should have been a proper consultation process, including an analysis of the financial impact of significant reductions in corporation tax on Northern Ireland’s block grant, before introducing legislation in Parliament.
	It is good news that a comprehensive system has been agreed to deal with the past. It is to be hoped that, over time, victims and their loved ones will develop confidence in the integrity of the new architecture and get the truth and justice they have been denied for too long. We also support the Government’s decision to make new investment available to boost integrated education, which is one of the most powerful manifestations of what a shared future can mean.
	However, I have a number of questions for the Minister. First, what assessment have the Government made of the impact on the block grant for Northern Ireland of reducing corporation tax to the levels in the Republic of Ireland? Secondly, what criteria will be applied to determining whether penalties will be levied by the Treasury next year in connection with welfare reform? Thirdly, what is the timescale for the creation of a new system to deal with the past? Fourthly, what negotiating process will now be put in place to deal with unresolved issues such as parades and flags, and other identity issues such as the Irish language? Fifthly, what process has been agreed to monitor the implementation of this agreement?
	These are genuine questions, to which we hope the Government have turned their mind. We do not want a situation where we are not totally and fully prepared—as far as possible—for any particular new situation in Northern Ireland.

Baroness Randerson: My Lords, I welcome the broad support of the noble Lord and, in particular, the appreciation he has expressed for all of those involved in this process and the statesmanship that has been shown. However, I have to say yet again in this House that I reject all notions that the Secretary of State and the UK Government have been in any way disengaged from the process. The Secretary of State has been involved throughout the past two years in the processes that have gone on to reach agreement.
	What changed significantly was that in the summer the leaders of the political parties asked the Secretary of State to become directly involved. Prior to that they were having discussions and negotiations—and, indeed, slowly making progress—on these issues but had failed to reach an agreement. It is significant that 12 weeks of intense discussions and negotiations, led by the Secretary of State and with the involvement, where appropriate, of the Irish Government, have led to this important agreement.
	I regret that the noble Lord has not given the full support of his party to the proposal to devolve corporation tax to Northern Ireland. The desire for this across the community in Northern Ireland appears to unite both the political parties and the business community. They believe it is a significant issue for their future prosperity.
	The noble Lord asked me a number of questions and I fear that I may not have been able to take down the full details. Obviously, I will review the record and write to him if necessary. However, I emphasise that the Government are keen to get working on the issues and with the bodies associated with the past, but I should point out that this needs Westminster and Assembly legislation. In contrast, we would expect the work on flags to be up and running by June. We are expecting the Executive to introduce legislation relating to welfare reform this month.
	The noble Lord also asked me about corporation tax and adjustments to the block grant. There will of course be adjustments but precise details will have to wait until we know the rate and the precise shape of the plans for the devolution of corporation tax. As there has been with the Scottish Government and the Welsh Government, there will be appropriate discussions with the devolved bodies prior to the devolution.

Lord Mawhinney: My Lords, reflecting on the Statement just made by my noble friend, it is quite easy to understand why Peter Robinson and Martin McGuinness would be pleased to have an extra £2 billion a year to spend. I was less clear about what my noble friend meant when she said that this £2 billion a year would help to wean the Northern Ireland economy off its overdependence on the public sector. Will she explain what that means?

Baroness Randerson: Perhaps I may first make clear to noble Lords that the additional funding is not £2 billion a year. It is £2 billion over a number of years in excess of five years. It is not £2 billion of additional money; it is £650 million of additional money over that period. The money beyond that is spending power associated with additional flexibilities granted for the Executive’s budget. The noble Lord asked about the efficiency of the public sector. The reforms that have taken place within the Civil Service and in the public sector generally in the rest of England, Scotland and Wales have not taken place to the same extent in Northern Ireland. Therefore, it is suffering from severe financial pressures. Those reforms need to take place. It is a condition of the additional funding that the Northern Ireland Executive embark on those reforms and we expect them to do that imminently.

Lord Shutt of Greetland: My Lords—

Lord Kilclooney: My Lords—

Lord Christopher: My Lords—

Baroness Garden of Frognal: There is time. I suggest we hear from the Liberal Democrat Benches and then the Cross Benches before we come back to the Labour Benches.

Lord Shutt of Greetland: I welcome the Statement. I trust we are moving forward and that deadline diplomacy has worked. As ever, it is sad that we have to consider so much about the past. In the 75 paragraphs in the Stormont House agreement, 40 refer to flags, parades and the past. I note that the agreement establishes six new bodies; namely, a commission on flags et cetera, an oral history archive, a mental trauma service, a historical investigations unit, an independent commission on information retrieval, and an implementation and reconciliation group. It would be splendid if these bodies took matters forward, but of course they do not come for free. The document suggests that £150 million will be available over five years to help with these new bodies. What will the total cost of the new bodies be?
	In particular, I welcome paragraph 69 under the heading “Outstanding Commitments”, which makes it seem just an afterthought. It talks about,
	“initiatives to facilitate and encourage shared and integrated education and housing”,
	and matters such as social inclusion. If we are really to see integrated services in Northern Ireland, what cost savings does the Minister believe there will be? It will be interesting to note, on looking further into the past, the contrast between the costs that we may well have to expend and what can be achieved in the future if we are to see some real integration.

Baroness Randerson: The noble Lord refers to the issues related to the past. As was made clear in the Statement, issues associated with the past in Northern Ireland are really the biggest factor that has eluded previous agreements. If this set of bodies proposed here are established and are able to work effectively, clearly considerable progress will have been made.
	Noble Lords will have noted that there are measures built into this to monitor progress; significant effort is being made to make sure that progress is monitored on a regular basis.
	The overall cost of establishing those bodies is not of course precisely known. The £150 million in the agreement is the UK Government’s contribution to that cost but, since those bodies touch upon devolved issues, it is entirely reasonable and totally expected that the Northern Ireland Executive will contribute to their cost. Present arrangements are not necessarily working very well and cost money—so this is not entirely new money.
	The noble Lord referred to the costs of division. He knows from his considerable experience that various estimates of the costs of the divided society in Northern Ireland have been made. They are variable, but they all show significant cost to that society every year.

Baroness O'Loan: My Lords—

Lord Kilclooney: My Lords—

Baroness O'Loan: My Lords, the Ministered gestured to me.

Baroness Garden of Frognal: Could your Lordships keep their remarks short? There will be time for everybody. I indeed gestured in that direction and apologise if that was the wrong thing to do.

Baroness O'Loan: My Lords, thank you. I have four simple questions.
	First, a number of cases are currently excluded under the Stormont House agreement from the work of the historical investigations unit. Those cases were previously investigated by the historic inquiries team. However, Her Majesty’s Inspectorate of Constabulary has said that many of these investigations were most unsatisfactory. Can the British Government ensure that they will not be embarrassed in future because our Article 2 obligations are not being complied with?
	Secondly, can the British Government and the Minister assure us that the Government will ensure that the historical investigations unit has access to all intelligence and information, particularly that held in this part of the United Kingdom by the security services, the Armed Forces and GCHQ?
	Thirdly, what actions will the Government take to ensure that the historical investigations unit has the full legal powers that it needs?
	Fourthly, does the £150 million have to provide for victims, or will they be provided for separately? On the matter of trauma services there is a massive unmet need in Northern Ireland: that is a costly and lengthy process.

Baroness Randerson: The noble Baroness first asked a question relating to human rights obligations. I am sure that she has noted the reference to that in the agreement. There is an awareness by the UK Government, and indeed all those involved, of the need to ensure
	that the processes abide by human rights obligations. Therefore, there is work to be done, in particular by the Executive but also by the UK Government, to smooth that process.
	In relation to access to intelligence information, and indeed access to information in general, the UK Government will of course ensure that the required information is made available, while balancing the need to ensure the safety of individuals, which is an obligation that is always the case in these situations. It is our intention that the bodies concerned will have the powers they need to do an effective and efficient job, particularly on a timescale satisfactory to those who suffered during the Troubles.

Lord Dubs: Will the Minister confirm that the historical investigations unit will not be constrained from looking at any of the significant cases in the past? I could mention Ballymurphy and Finucane. Will it be able to look at those in the detail that it needs? Secondly, what is the relationship between the outcome of such investigations and the possibility that there might be recourse to the courts as a result?

Baroness Randerson: It is expected that when there is a need for recourse to the courts, obviously there will be police investigations and decisions by the DPP on whether to prosecute in the normal manner. There is certainly no concern about that process in our minds. I am sure the noble Lord will understand that there is work still to be done in ensuring that the detail is fully fleshed out with regard to the bodies outlined here. Your Lordships will see that although there is significant detail in the agreement and it has been well thought-through, obviously there is a lot of work still to do on the day-to-day way in which these bodies are to operate. It is expected that there will be a meeting later this month where work will progress further on the bodies suggested in the agreement.

Baroness Harris of Richmond: My Lords, £150 million is indeed a significant sum to deal with the past. But I ask my noble friend the Minister: if at the end of those five years significant inquiries are still to take place that have not been resolved, what will the Government do then?

Baroness Randerson: The noble Baroness refers to the timescale that we are envisaging. For example, we hope that the historical investigations unit will be able to complete its work in five years. The Government of the day will have to consider the situation at the end of that time. It will be for the Government of the day to make that decision.

Lord Kilclooney: My Lords, I was involved in the talks leading to the Belfast agreement and representatives of all political parties with elected Members were involved in those talks. Why on this occasion were the elected representatives of one-third of the Unionist voters excluded from the talks that led to this provisional agreement? Is that the basis on which to get all-party support in the future?
	When it comes to corporation tax, I very much welcome the views expressed by the noble Lord, Lord McAvoy. Of course businesses in Northern Ireland have welcomed the move because they will be paying less tax. But the Minister has confirmed—at last—that if the Northern Ireland Assembly reduces corporation tax in Northern Ireland, the block grant will be reduced. That will mean less for hospitals and education. It will be rejected by many people across Northern Ireland.

Baroness Randerson: The noble Lord referred to the reduction in the block grant. That process is taking place with the devolution of other taxes. It is, of course, a decision that the Northern Ireland Executive would take in the light of their decision to pursue corporation tax devolution because the purpose behind pursuing it is to create a more prosperous society and to encourage the establishment of further businesses and further inward investment.
	The noble Lord refers to the parties at the talks. I am sure that he is fully aware of the background details of how the talks developed over two years. It is therefore the case that the leaders who were there believed that at that time there was purpose in talking together.

Lord Christopher: My Lords, my question is extremely short. If I were a chief executive of a successful plc registered in London and corporation tax dropped to 12.5% in Belfast, as it is reasonable to assume, what reason would I give my shareholders for not moving my office to Belfast?

Baroness Randerson: The noble Lord raises a legitimate issue which the UK Government have considered and which I know the Northern Ireland Executive is bearing in mind, but it is something for the corporation tax Bill when it comes before this House.

Lord Morrow: My Lords, can the Minister give an assurance today that the proposed new historical investigations unit will not equate criminals and victims as coequals, that innocent victims will be afforded the respect and regard they deserve and that a clear distinction will always be maintained as the HIU takes forward its work?

Baroness Randerson: The historical investigations unit is being set up in a way which ensures that there will be cross-community support. I think that answers the point of the noble Lord’s question.

Lord Cormack: My Lords, when I chaired the Northern Ireland Affairs Committee in another place, it became increasingly clear to us over the five years we were working that there had to come a time when a line was drawn. I ask my noble friend to bear that in mind in conversations with the Secretary of State. We have another five years, but we cannot have another five years after that and another five years after that. The people of Northern Ireland deserve to live in the future, not in the past.

Baroness Randerson: While entirely supporting the final sentence of my noble friend’s comments, I ask him to bear in mind that it takes a very long period of time to turn around a society as divided as that of Northern Ireland.

Lord Bew: My Lords, on the issue of the past, I welcome the Minister’s explanation that there will be careful monitoring of the results produced by this process. In the light of Mr Adams’ statement a mere three weeks or so ago that the IRA had no corporate memory and therefore could not, in the context of the Maíria Cahill case, contribute in any meaningful way to the work of historical recovery, it is slightly difficult to see how we can have, in the words of the Statement by the Secretary of State for Northern Ireland, a process which is “balanced, proportionate, transparent and accountable”.
	One hundred and fifty million pounds is a lot of money. It is 20% of the amount allotted for the Northern Ireland Civil Service early retirement scheme. The taxpayer is entitled to reassurance that there will be careful monitoring of this process and that for this £150 million there will be something approaching a real, balanced process. This cost is proportionately far more than the historical aspects of the Bloody Sunday inquiry, which is reputed to be so highly expensive.

Baroness Randerson: The noble Lord points out the complexities of dealing with the range of issues that this agreement covers. The number of bodies being set up is significant. They fulfil a whole range of functions. It is intended that one of them should be established as an international body. It is intended that some of them operate completely independently of political representatives. Others do not, but there is always that balance when there is elected political representation.
	It is important to bear in mind that the agreement makes provision for an implementation and reconciliation group to oversee the bodies and the work being done on the past. It is important to bear in mind also that the British and Irish Governments and the Northern Ireland Executive are committed to regular, six-monthly monitoring meetings to ensure that things are proceeding in the fair, balanced and transparent manner that I mentioned.

Lord Forsyth of Drumlean: While understanding the particular circumstances in Northern Ireland, does not my noble friend think that there is a danger in this piecemeal constitutional reform? For example, what are we to say as unionists to the nationalists in Scotland who are demanding corporation tax powers on the grounds that it will help their economy when my noble friend is justifying corporation tax in Northern Ireland being set on precisely the same basis? Should we not be careful in moving forward with devolution that we do so on a basis that is balanced and clearly thought through? Is not my noble friend’s answer that she is not yet able to tell us what the effect on the block grant would be deeply worrying in the context of further devolution of tax powers?

Baroness Randerson: The noble Lord points out that there is of course an inevitable read-across from one devolved nation to another. That is something that we are all very conscious of in relation to both Wales and Scotland. I should point out the one unique feature in relation to Northern Ireland: Northern Ireland shares a land border with the Republic of Ireland, which has a very much lower rate of corporation tax. Therefore, competition to attract business is very much more intense for Northern Ireland than it is for Scotland, Wales and England. It is important to bear in mind that unique position.

Pension Schemes Bill
	 — 
	Committee (1st Day)

Relevant document: 12th Report from the Delegated Powers Committee
	Clauses 1 to 7 agreed.
	Amendment 1
	 Moved by Lord Bradley
	1: After Clause 7, insert the following new Clause—
	“Decumulation
	(1) A qualifying money purchase scheme may not sell annuities directly to anyone who has saved with the scheme unless this is the recommendation of an independent annuity broker.
	(2) A relevant scheme may provide an independent brokerage service itself.
	(3) A self-provided annuity brokerage service will be considered independent for the purposes of this Act if the provision of its services is subject to the direction of independent trustees.
	(4) Pension schemes shall ensure that any brokerage service selected or provided meets best practice in terms of providing members with—
	(a) an assisted path through the annuity process;
	(b) ensuring access to most annuity providers; and
	(c) minimising costs.
	(5) The standards meeting best practice for annuity brokerage services shall be defined by the Pensions Regulator after public consultation.
	(6) The standards set out in subsection (5) shall be reviewed every three years and, if required, updated.”

Lord Bradley: My Lords, decumulation is the process of converting pension savings into retirement income. I hope that, as we deliberate in Committee, we will try to avoid as much jargon on pensions as we possibly can to make it understandable not only to ourselves but to the public outside.
	Our new clause on decumulation is aimed at protecting savers who default into an annuity with their same savings provider. At the start of Committee stage it is important to note that we are in a pretty dramatic and fast-changing environment for pensions. We must not forget those parts of the pensions market that are not currently working for consumers as well as they should. The amendment would provide safeguards for those who do not take advantage of the new flexibilities provided by the 2014 Budget changes, and for whom
	an annuity remains the best product. This may be the case for some who feel that they would still prefer the security of a product that guarantees them a set income for their entire lives, without the difficulty of making predictions about life expectancy. That can still be a very attractive option.
	The ABI code of conduct requires members to encourage savers to use the open market option when choosing an annuity. However, 50% of savers still buy an annuity from the company they have already saved with. This situation could be further exacerbated by auto-enrolment, under which the majority will be enrolled by inertia. We know that, as a result of not shopping around, many get a much worse deal than they could have had, so this could have a serious effect on the size of their annuity. The National Association of Pension Funds estimates that those who do not shop around get up to 20% less in their annuity. The Financial Conduct Authority estimates that consumers could be missing out on up to £230 million in additional pension savings because they are not shopping around in the most effective way.
	We know that this market has not served consumers well in recent years, and the process remains complex. The Financial Services Consumer Panel recognised this in December 2013, and said that a “‘good’ annuity outcome” might well require expert help. Our new clause would require the recommendation of an independent broker to sell an annuity to someone who has saved with the same scheme. This would protect consumers from getting a bad deal when taking a crucial decision in their lives. As was made clear in Committee in the other place, pension schemes should ensure that any brokerage service they employ on behalf of their members meets best practice in terms of providing members with an assisted pathway through the annuity process, ensuring access to most annuity providers and minimising the costs. Pension schemes have a duty to get the best possible deal for their members, or to do it themselves in-house. Such good practice can be found in pension schemes such as the Royal Mail and the National Employment Savings Trust.
	That view flows partly from the significant evidence that the best way to get value for money on an annuity is to “bulk-buy” that annuity on behalf of the cohort of scheme members who are going to retire. For example, let us look further at the National Employment Savings Trust, which requires annuity providers to make sealed bids to provide annuities for those who have saved with NEST. It takes the cohort coming up to retirement and says to the providers, “We have X people. Given their personal circumstances, and taken together collectively, what offer of an annuity will you make?” This seems a sensible way to proceed. It has the advantage of scale, and the expertise of the same pension scheme that built up the pension pot is used to turn it into a retirement income.
	This is a brief opening amendment in the form of a new clause, so I shall summarise the position now. Annuities as they are currently constituted have not been delivering value for money for the whole of the market. The fundamental reason is that half of those coming to the point of annuitisation—turning their pension pot into an income—do not shop around for the best deal because it can be a complex, confusing
	and difficult process. Because of that and because of the advantages of bulk-buying by a professional expert, it seems sensible, for the consumer to get it right for their retirement income, to empower pension schemes to undertake that responsibility. As the new clause draws on best practice, I hope that the Government will see its merits. I beg to move.

Baroness Drake: My Lords, I have some sympathy with the thrust of Amendment 1, under which my noble friend seeks to protect pension savers from purchasing an annuity which is not good value for money or appropriate to their needs. If there was any doubt about the nature of the problems in the annuities market, the recent FCA report has clearly put those to rest. It makes evident the need for assisted paths for consumers through the annuity process. Notwithstanding the new freedoms, annuities still have an important role to play in securing retirement income, and we need the FCA urgently to push ahead with tackling the conduct of providers in the market. With the new freedoms and the anticipated product innovations that will flow from that, the Government and the saver are still very dependent on the market to make them a success and mitigate consumer risk.
	The issue of assisting the consumer through the annuity process—the role of the employer, the responsibility of the saver and the role of the provider—is complex. No doubt later in Committee—at least, I hope we will; I hope that an amendment is winging its way—we will debate a second line of defence provision to control the conduct of providers selling retirement income products, including annuities, trying to enhance consumers’ protection when they are in the purchasing process. I hope that we can pursue in more detail how the Government can mitigate the pension saver’s risk when purchasing an annuity, when, I hope, we can get into a wider debate on a second line of defence across all retirement income products.

Lord Bourne of Aberystwyth: My Lords, in opening for the Government on this, I welcome the comments of the noble Lord, Lord Bradley, regarding jargon. We certainly agree on that and I suspect that we will agree on much more as we proceed through the Bill. I, too, will try to avoid jargon and too many acronyms, which seem also to be a feature of the pensions landscape.
	We fully appreciate the intention behind the amendment and agree that consumers must be given the necessary information and support on their retirement choices in this new flexible landscape, which I think we all welcome. As the Financial Conduct Authority’s Thematic Review of Annuities and recent published findings from its market study concluded, competition in the annuity market is not working effectively—as the noble Lord, Lord Bradley, said. That means that many consumers are not getting the most out of their hard-earned savings.
	To be clear, annuities can be good value where the individual member selects a product that meets his or her needs. That is why the Government are legislating in the Bill to deliver a service providing the public with guidance. That will ensure that individuals can access
	the support that they need to understand and navigate their retirement choices—for example, to help them decide whether an annuity product is the right choice for them at all. Where they decide to purchase an annuity, they must be encouraged and supported to shop around for the best deal. Those are key objectives for the guidance and the Financial Conduct Authority’s rules will underpin it. I will come back to those issues shortly.
	Turning to the specifics of the noble Lord’s amendment, I am not convinced that imposing additional costs on either some schemes or members is the best way to facilitate the increase in shopping around. The amendment would effectively require all schemes that offer an annuity to provide or source an independent annuity broker run by independent trustees and overseen by the Pensions Regulator. What is less clear from the amendment is who is to meet the extra costs of this provision. Although some 52% of schemes already offer an annuity broker service, requiring all schemes that provide annuities to their own members to offer or source such a service must come at an extra cost. These additional costs must either be met by all the members of the scheme, whether or not they use the service, or by those members who do so, on some kind of fee or commission basis. If it is the former, then clearly scheme costs increase for all members even if they were going to go and purchase their annuity or other product elsewhere. If it is the latter, then the effect would be to increase the costs of selecting annuities from certain schemes, making them less attractive, or requiring members to pay fees for a decision that they may have made in any event.
	The changes proposed by the noble Lord could restrict members’ choice because members would not be able to secure a pension income from the scheme unless a recommendation from an independent annuity broker had been secured. It might also have the perverse effect of meaning that the pension saver did not look at their own annuity provider because they feared the additional cost and went elsewhere, deterred from going for what might have been their best option. This would create a real risk—and I agree with the noble Baroness, Lady Drake, that risk is inherent in this and we must do what we can to ensure that the risks are minimised—that members would stop considering internal annuity products, even though this might be the best choice for them. It would particularly impact those whose scheme or provider offers them a guaranteed internal annuity rate. This can often be a higher rate than available on the open market, yet individuals would be deterred from considering it by the extra costs of using the brokerage service.
	There is also the question of the proposed role of the Pensions Regulator. The Pensions Regulator primarily oversees occupational pension schemes. Many of the annuities offered and bought by members using their defined contribution savings are provided by contract-based pension schemes. These contract-based schemes are then regulated by the Financial Conduct Authority, which also oversees the wider financial services industry, including annuity brokerage. It is therefore not clear how the requirement for the Pensions Regulator to set
	standards for best practice for annuity brokerage can ensure independence of all annuity brokerage firms offering this service, when they are all regulated by the Financial Conduct Authority.
	Although we do not believe that imposing this brokerage requirement on all schemes is the correct approach, there is clearly a need for consumers to receive support in making retirement choices—I absolutely agree on that. This is why the Government and the Financial Conduct Authority are requiring pension providers to signpost customers approaching retirement to the guidance service and encouraging them to use that service, which, of course, is at no cost to the consumer. The guidance service will help consumers to understand their retirement choices, including the different kinds of annuity product available—for example, single or joint life or enhanced annuities for those with health problems. It will also provide consumers with information on how to proceed to the next step if they wish to purchase a product, for example by signposting them to the Money Advice Service’s impartial annuities comparison table.
	The Financial Conduct Authority’s policy statement of 27 November 2014 reaffirmed the expectation set out in its own rules that firms encourage consumers to shop around on the open market whether or not they have sought guidance and that they should receive sufficient information, including a key features document, about the consequences of their choices before signing up to a purchase or variation of an existing contract. It also makes clear that it is possible for the provider to draw that to a customer’s attention, where the provider feels that the customer’s action is potentially inconsistent with their circumstances. Importantly, providers will be able to do this without overstepping the boundary into regulated advice.
	The Government are also working with industry, in particular through working groups convened by the Association of British Insurers and the National Association of Pension Funds, to ensure that material communicated to customers is genuinely effective in encouraging them to engage with their retirement choices. This includes ensuring providers supply information to customers about their pension pots in a simple and accessible format so that they can compare their provider’s offerings with that of market rivals. The Financial Conduct Authority has also made a series of recommendations including that providers should make clear to customers how their annuity quote compares to other providers in the market.
	The Financial Conduct Authority is currently considering how best to build on its market study as part of wider operational objectives of promoting competition and protecting the interests of the consumer. The Government look forward to seeing how this work will progress. We believe that this approach, which will allow individuals to make choices supported by an independent guidance service with access to the right information, is the right way forward. On that basis, I urge the noble Lord to withdraw his amendment.

Lord McKenzie of Luton: My Lords, can I probe the Minister on his response? It seemed that he was praying in aid the guidance service as an alternative
	to the proposition advanced in the amendment. We will obviously come on to discuss the guidance service more fully on Monday, but I understand that this is, effectively, an upfront and one-off sort of offer. With increased flexibility, are we not likely to be in an era where people will no longer necessarily make the cliff-edge decision on an annuity on day 1 of retirement but will wish to address that some time later during the course of their retirement? In those circumstances, if somebody was looking to purchase an annuity five years after retirement, and having had some income draw-down or other product in the interim, what would be in place to protect people in the annuity market at that point, as the Minister suggested, and not on day 1? Presumably, the guarantee will not be available to be provided on a free basis.

Lord Bourne of Aberystwyth: If I might first take the noble Lord up on one point, what is being proposed by the noble Lord, Lord Bradley, opposite is an alternative to the guidance service which is in the Bill. The guidance service will guide people and there will be a wake-up call via the literature provided before a member’s retirement telling them of the guidance service and with clear signposting to it, of the options that face them on retirement and afterwards. It will not just be explained what you can do on day 1 but later on. We anticipate that many people will take that up. Some will not choose to do that, but it is clear that that sets out the pathways for the future. It is only guidance; any advice taken, whether immediately or later on, will of course be subject to the market. We believe that the choice being offered here—supported, as I understand it, by the Opposition—is important and that we can depend on a developing market with innovative products, in which members will be able to shop around not just on retirement but afterwards. All this will be set out in the wake-up call and the guidance that will follow once a member retires.

Baroness Drake: If I may presume to comment on my noble friend’s amendment, the Minister made the comment that it was being proposed as an alternative to the guidance. I do not think that it is. It is basically saying that guidance is guidance; that is what you would receive but you then move into the purchase or decision activity which flows from that guidance. It is what happens at that stage—the relationship between the consumer and the person providing the annuity, whether it is a scheme or a retail provider of retirement products—which is causing a lot of people anxiety. Some refer to it as the second line of defence; this is another way of addressing that. It is trying to regulate the quality of the exchange between the provider of the product, be it an annuity or in some other form, and the consumer at that point. That is a post-guidance activity, not a substitute for guidance.

Lord Bourne of Aberystwyth: I take the point that the noble Baroness, Lady Drake, is making on this issue, but it is clear that the guidance will set out the options available on annuities and, where appropriate, signpost people to taking advice. If they want to compare the annuity product being offered by their own provider with that of somebody else, all that will
	be set out. Whether it is an adjunct to or a substitution for it is somewhat academic. There is a cost associated with this and we believe that the proposals in the Bill, setting out the opportunities for guidance which will come at no cost to the consumer, are the right way forward. They will set out the options available to the consumer on retirement.

Lord McKenzie of Luton: If I may come back on that point, setting out the options available on retirement is one thing, but what happens if someone does not wish to annuitise on day 1? Five years down the track, their life circumstances may have changed dramatically—they may have married, there may have been a death in the family and all sorts of things may have happened to their life—which might mean that the original guidance is not as relevant as it might have been. What is going to protect people, as my noble friend Lady Drake said, from the issues of how the provider is acting at year 5 in those sorts of circumstances?

Lord Bourne of Aberystwyth: Clearly, any form of guidance is not going to be appropriate for ever on specific issues. The guidance is not intended to address the specific situations of every consumer; that is the purpose of advice. The guidance is indicating to people what they should do in their particular circumstance, at that stage, to look at the future. It is for those consumers to decide whether to take that option or not; that is the purpose of the guidance. It is not specific in the way that the noble Lord, Lord McKenzie, is suggesting.

Lord Bradley: My Lords, I am grateful to the Minister for his comprehensive reply on the new clause. The whole purpose of this and of many of the amendments we are tabling in Committee is to assure the public of their protections and to ensure that they have the information and that it is communicated effectively to them so that they can make proper choices at a crucial moment, or moments, in their retirement or post-retirement period. While we have immediately—probably quite rightly—started to discuss the guidance guarantee, I did not expect to start that process within 15 minutes of the start of the Committee stage. That will be an incredibly important part of our deliberations and, while it is very useful for the Minister to start to lay out the purpose and detail of that guidance, I know that we will have many opportunities to expand on that as we progress through the Bill.
	The Minister has raised a number of fears about this new clause, which I will look at and reflect on carefully in order to ensure that the issues he has raised will be comprehensively covered by the range of activities to protect the consumer in the way that we want. I am grateful for the comments of my noble friend Lord McKenzie in support of the general thrust of this amendment, which is another attempt to get belt and braces around the advice and guidance to ensure that people are making sensible decisions.
	As my noble friend Lady Drake said, we will be bringing forward the issue of a second line of defence, which is relevant to this general debate, again on the
	basis that we want to ensure that the public have confidence in the new arrangements that are being put in place and feel that there is protection for the decisions that they make. We will come back to whether guidance is sufficient to achieve that objective, but we need to look at these elements as a comprehensive package of attempts to achieve the objectives I have set out. However, in the light of the Minister’s comments and the opportunity to reflect on those for a later stage, I beg leave to withdraw the amendment.
	Amendment 1 withdrawn.
	Clause 8: Introduction and definition
	Amendment 2
	 Moved by Lord Bradley
	2: Clause 8, page 4, line 43, at end insert—
	“( ) A statutory instrument containing regulations under subsection (3)(b) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

Lord Bradley: My Lords, Amendment 2, which is in my name and that of my noble friend Lord McAvoy, flows from the recommendations of the Delegated Powers and Regulatory Reform Committee’s 12th report of Session 2014-15. It should be stated at the outset of our deliberations in Committee that the ability to scrutinise this incredibly important piece of legislation, affecting millions of people already in a pension scheme, about to retire or starting the process of accumulating a pension pot, has clearly been limited by a number of factors.
	First, many new clauses and amendments were introduced at a very late stage in the other place, so hampering its ability to scrutinise those aspects of the Bill. Secondly, to date, no draft statutory instruments are available for scrutiny alongside this piece of primary legislation, when that legislation relies on secondary legislation to make meaning of many of the proposals in the Bill. Thirdly, there is an incredibly short timetable to get this legislation through Parliament—I understand that implementation is still due to begin at the start of April, barely three months away. Fourthly, this is one of a number of pension Bills and Acts—I think we are up to four, but I am thinking particularly of the Taxation of Pensions Act—that this Bill is inextricably linked to. It is important that we are able to ensure that there are no tensions between the different Bills and Acts and that the freedoms and flexibilities do not in any way contradict the ability to have security of retirement income in future.
	I will balance those critical comments by saying that I thank the Minister for the courtesy he has shown in providing information to me and the Committee at the earliest opportunity and allowing discussion about it. However, it is still the case that a lot of information is still to flow on the Bill, which limits our ability for effective scrutiny. I must also make it clear that we are not fundamentally opposing the Bill; in fact, we are positively supporting it. However, we need
	to ensure that all the details of this legislation are in place so that the public, who will use their new freedoms and flexibilities, are fully aware of the consequences and do what is in their best interests in terms of lump sums or their retirement income.
	In our view, the regulation-making powers conferred by Clause 8(3)(b) should be subject to the affirmative procedure rather than the negative. The Department for Work and Pensions’ delegated powers memorandum argues that the negative resolution procedure is appropriate because,
	“the Department does not anticipate that there will be many situations in which benefits will need to be excluded from the definition of ‘collective benefits’”,
	and gives the example of the with-profits arrangements that the Government may wish to exclude from the definition in this clause to avoid any potential for double regulation.
	There is, however, the wider point that the powers conferred by this and other clauses to shape the regulatory environment for collective benefits leave the majority of the work in defining what these benefit schemes will look like to secondary legislation rather than primary. The Delegated Powers Committee said of the Bill that it is,
	“remarkable for the number and density of the delegated powers it confers. For instance, Part 2 (which introduces the notion of ‘collective benefits’ in the context of private pension schemes) contains 28 clauses, all of which confer or amplify delegations of legislative power, and only two of which comprise any significant provision that does not confer powers”.
	The committee also notes that the number of clauses introduced as the Bill progressed through the other place made it difficult to scrutinise them, as I said earlier. Taken together, those two points make scrutinising this important legislation very difficult. As a result, we will be seeking throughout Committee to get as many further details as possible about the shape of the regulations that are likely to follow. For instance, will the Government be able to produce any draft regulations ahead of Report?
	While we support the provisions and want to see collective defined contribution schemes work, and have previously called for their introduction, we also want to be clear how they will work in practice. As I say, this relies on the secondary legislation. The House will be familiar with the potential benefits that can be provided by these schemes and I think it is worth reminding ourselves of them, as they provide tests for what we would like to see emerge as the market develops.
	First, they can provide greater certainty to members as to the likely income they will receive in retirement when compared to individual defined contribution schemes. Secondly, they can lead to increased economies of scale when compared to individual defined contribution schemes. Thirdly, they can provide the opportunity for more efficient investment strategies that do not have to divest from relatively higher returning investments as the individual scheme members near retirement. Further, they could be popular with savers due to the fact that they can remove some of the complexity for the individual saver in assessing an income in retirement. Research from the IPPR has shown that the solidarity aspects of CDC schemes—the sharing of risk and reward—is also attractive.
	According to historic data, a CDC scheme would have outperformed an individual DC pension scheme by 33% in 37 of the last 57 years. We see the benefits of many of those factors in Holland and Denmark with the large economies of scale and reduced fees and other costs. It is also clear, while we are currently looking for models capable of providing better income in retirement for savers, that less than half of adults are currently saving adequately for retirement, and as many as one in five has no retirement resources beyond the state pension. This is a challenge that lies ahead.
	Relatively recent progress in alleviating pensioner poverty should not obscure the effects of this. Some are given the impression that most pension pots are of sufficient size to enable the holders to head into the luxury car market, but research in 2012 from Partnership showed that more than half of those surveyed spent the additional money from their “enhanced annuity” on food bills, heating and electricity, and generally on paying for their cost of living. We also know that the median pension pot used to purchase an annuity in 2013 was less than £30,000, an amount that does not get you much of the way towards a Lamborghini.
	In a recent Parliamentary Question which I tabled I asked what percentage of individuals had accumulated different levels of DC wealth—that is, the amount of money in the pot. The Answer was that 26% had an income pot of between £0 and £4,999. Taken together, 58% had a pension pot below £19,999. We therefore have to be realistic in our expectations about these matters and the effects that changes to the schemes may have. We are not talking about a vast number of people having huge amounts of money to which they will have access without consequences for what income they may get in retirement from those pension pots.
	The challenge of providing a good retirement income is clear, and CDC schemes are a good way of meeting it. It is just not yet clear what the Government are capable of providing in terms of detail so that we can be sure that the schemes will achieve the outcomes that we expect in supporting them. Although we support the provisions in Part 2, we want the ability to further scrutinise the details on which collective schemes are based so that we can have assurances that they will achieve the objective that has been set.
	I recognise that the Government have now taken a view on that. We believe that the affirmative resolution of the regulations is the best way of ensuring scrutiny by this House. I look forward to hearing, first of all, why the Government did not feel it appropriate to provide for the affirmative resolution in the first instance, and what proposals they will now bring forward to ensure that that scrutiny can be achieved. I beg to move.

Lord German: My Lords, I have considerable sympathy with the amendment before us, not least because the chair of the Delegated Powers and Regulatory Reform Committee of your Lordships’ House would be very upset if we did not make sure that the report was brought before your Lordships’ House.
	Pension Bills in the past—the report quotes pension Bills from the 1990s—were frequently used, with very much of the detail coming in the following regulation.
	However, as we know from the debates and discussions we have already had, there are no drafts available; we have had outlines and a sense of direction, but at the moment we do not have substantial amounts of supporting legislation drafts before us, as we might have had in much further primary legislation relating to welfare. The recommendation in paragraph 6 of the report of the Delegated Powers and Regulatory Reform Committee is clear. It says that,
	“in view of the potential for the power to be exercised in a way that could significantly alter the constituent benefits included in the definition”,
	of collected benefits,
	“we are unpersuaded by the DWP’s explanation … why it considers the negative procedure to be an adequate level of Parliamentary control”.
	Perhaps my noble friend the Minister in his response might tell us whether the Government will accept this report, and it might also help us if they say whether they would accept the other recommendations about the negative and affirmative resolution and first exercise recommendations which are in that report. That might save us a little time in the future.

Baroness Drake: My Lords, for the purposes of all of today’s business on the Bill I refer to the interests which I have registered as a remunerated trustee of both the Telefónica O2 and Santander pension schemes and the board of the Pensions Advisory Service, and as a non-remunerated member of the board of the Pensions Quality Mark and a governor of the Pensions Policy Institute. I am also a member of the Delegated Powers and Regulatory Reform Committee. That is like an act of cleansing; I hope that I have stated all possible interests that could appear to conflict with anything I might say today.
	I support Amendment 2 and very much share the spirit of the contribution made by the noble Lord, Lord German, particularly his comments about the estimable chair of the Delegated Powers Committee. I accept that it will be a very significant challenge to get collective benefit schemes established in the first instance. As we heard from the NAPF and the ABI, there is little observed appetite from providers or employers, certainly at this stage, for engaging with such schemes.
	There are other barriers and constraints to be overcome because collective benefit schemes require an assured flow of new members, excellent governance and full transparency, and the new freedoms with their emphasis on individual freedom rather than risk-sharing may well act as a further deterrent. None the less, for those of us who are genuinely interested in seeing the development of more efficient ways of risk sharing, the Bill provides the opportunity to set the founding legal framework and is therefore worthy of proper scrutiny. In fact, not to scrutinise would be a failure to engage with the work that has been done by the Minister for Pensions and the Department for Work and Pensions.
	However, Clause 8 is a key and critical provision because it sets the definition for what are collective benefits, on which the rest of the clauses in Part 2 and many of the associated delegated powers depend. That is
	why it is so critical in its construct and its definition of the delegated powers associated with it. In my view, the power to set regulations under Clause 8(3)(b) should be subject to the affirmative procedure because the definition of what is or is not a collective benefit makes it so critical to the scope of the whole of Part 2, which deals with collective benefits.
	Clause 8(2) defines what a collective benefit is but Clause 8(3)—the subject of this amendment—defines what it is not. It is not a collective benefit if it is a money purchase benefit or, more particularly, some other benefit of such a description to be specified in regulation.
	I understand the Government’s reasoning when they indicate that with-profit arrangements, for example, provided by some insurers should not come within the definition of a collective benefit scheme. It is perfectly reasonable for the Secretary of State to want some flexibility to respond as the market develops and innovation occurs in scheme or benefit design.
	Clause 8(3)(b) would allow the Government to use regulation to avoid schemes being subject to the expense of meeting the detailed requirements set out in Clauses 9 to 35 if they are deemed not to be proper collective benefit schemes. But the clause, in granting the Government power to significantly alter by regulation the constituent benefits that are not included in the definition of collective benefits, has the ability therefore to potentially remove members of schemes out of the protection of the requirements in the other clauses in Part 2.
	This, of course, could have considerable implications for members and the scope of the whole of Part 2. The potential of this regulation to remove members from the protections they may already have by being in a designated collective benefit scheme, which subsequently a change of regulation deems that they are no longer in, makes it compelling that this remains a power that should be subject to the affirmative procedure. This should be as a general practice, not just in first use, because if collective benefits take off—one hopes that they do and we therefore have wide coverage and scale—any review or change to the definitions of the benefits embraced by such collective schemes will be of outstanding importance to the members.

Lord Bourne of Aberystwyth: My Lords, I confirm to the House and to the noble Lord, Lord Bradley, that the measures under the budget flexibilities are still intended to come into effect for April 2015. This is not the case for the measures relating to collective benefits.
	The Bill is deliberately a framework Bill, which is generally the case with pensions legislation. As my noble friend Lord German indicated, it is not unusual to have significant delegated powers in pensions legislation; it is often the norm. The Delegated Powers and Regulatory Reform Committee has made recommendations concerning the powers in Part 2, and I will come on to look at those. I share the enormous respect in which the noble Baroness who chairs that committee is held by the House.
	I confirm that the Government accept the views of the committee in respect of the powers in Clauses 9, 10, 11 and 21. We intend to table amendments on
	Report which will make regulations under those clauses subject to the affirmative procedure the first time those powers are used, as the committee recommended.
	This amendment relates to the committee’s recommendation about the power in Clause 8(3)(b). This power allows regulations to specify benefits that are not to be considered collective benefits and therefore exclude such benefits from the provisions of Part 2, as the noble Baroness, Lady Drake, just indicated. The committee recommended that this power be subject to the affirmative procedure. I will now explain how we are unable to accept that recommendation in full, although we recognise that there is a strong case for affirmative procedure on first use. We have therefore accepted that.
	Let me first give some background on collective benefits. Collective benefits are provided on the basis of investing members’ assets on a pooled basis, in a way that shares risks across the scheme’s membership and has the effect of smoothing out fluctuations, to a degree at least. The collective asset pool is managed on behalf of the members by trustees, or, in non-trust based schemes, by managers. We intend to use powers under Clause 9 to require that there will always be a target attached to collective benefits and that initial targets need to be achievable within a specified probability range. We will ensure that schemes offering collective benefits operate in a transparent and accountable way using a range of powers we have taken in Part 2, together with regulation-making powers in existing pensions legislation. Decisions about the rate of benefit ultimately paid to the member will be for the trustees or managers to make in line with their policies. We will consult fully on how best we use the powers in Part 2 to provide the appropriate framework for these benefits and to ensure good governance.
	As the Government set out in the memorandum to the Delegated Powers and Regulatory Reform Committee, there needs to be flexibility to respond to new developments in scheme and benefit design that result in benefits falling within the definition “contrary to policy intention”, as I believe the noble Baroness, Lady Drake, recognised. This power was included in the Bill to ensure that, from the outset, the definition of collective benefits would not catch any personal pension schemes set up by insurers that offer with-profits arrangements that might otherwise fall within the definition.
	The Government recognise that the committee rightly considers this a key provision, as it frames all that follows in Part 2 and defines it scope, that should be subject to parliamentary scrutiny. However, there are circumstances where the Government may need to use the power at a later date if new developments in scheme and benefit design result in benefits falling within the definition “contrary to policy intention”. This latter use of the power might require a very quick response to avoid members’ benefits being affected and to avoid schemes being subject to expensive requirements around the setting of targets, actuarial valuations and so on, which are not appropriate. I trust that noble Lords can see that the affirmative procedure could result in delay, leading to significant distress for members, who would wish the matter to be
	resolved as quickly as possible. This is why we believe that the affirmative procedure is inappropriate across the board.
	As I have indicated, the Government therefore propose that, as with the powers in Clauses 9 to 11 and 21, the power in Clause 8 should be subject to the affirmative procedure on first use, allowing Parliament the opportunity to debate the scope of the collective benefits provisions when the regulatory framework is first set up, but that subsequent use should be subject to the negative procedure so that the Government can act quickly if necessary.
	Turning to the noble Lord’s amendment, I hope that I have clarified the Government’s position on the Delegated Powers and Regulatory Reform Committee recommendations and my commitment that the Government will return on Report with amendments that will implement its recommendations on Clauses 9 to 11 and 21 in full, and in Clause 8 in part. I hope that the noble Lord will feel able to withdraw his amendment.

Baroness Drake: I come back to the point on which I was seeking clarification. If the affirmative procedure is used in the first instance on something quite straightforward, such as that an obvious with-profits policy arrangement is not to be included in collective benefits, but the subsequent use of the regulation under the negative procedure went to the heart, such as saying there is an existing collective benefit scheme and we take the view that it should cease to be a collective benefit scheme therefore retrospectively those members would lose the protections under Part 2, could the regulations not be used to weaken the protections that scheme members had?

Lord Bourne of Aberystwyth: The noble Baroness will be aware that the negative procedure will still provide a measure of protection. We are concerned about the protection of members where there is a need to move quickly. In those circumstances, retaining the negative procedure is the appropriate protection for those members.

Baroness Drake: I push the point as a courtesy because I care about establishing collective benefit schemes. I am assured by the chair of the Delegated Powers Committee—I wish he were standing next to me—that even under the affirmative procedure there is a provision which allows us to move quite quickly.

Lord Bourne of Aberystwyth: That would be an exceptional procedure. It is important for the industry and pensioners that we can provide assurance now that, where there is a need, there is provision to move quickly to ensure that collective benefit schemes are successful. I share the noble Baroness’s feeling that it is important that we give this a fair wind. We therefore recognise that there will be circumstances where the negative procedure is appropriate because of the great need to move quickly.

Lord Bradley: I thank the Minister for his explanation, for his more wide-ranging response to the report of the Delegated Powers Committee and for explaining the Government’s intentions in regard to the range of
	issues discussed and the recommendations made by that committee. It may disappoint him that that does not necessarily mean that we will not debate the clauses to which these regulations apply. There are wider points around those clauses which are not only about whether the regulations should be affirmative or negative. I hope the Committee will show tolerance as we go forward on that matter.
	As my noble friend Lady Drake clearly and concisely laid out, Clause 8(3)(b) goes to heart of the definitions of collective benefit schemes. We need to be absolutely sure that, through debating the regulations, we understand fully the consequences of the schemes and how they will apply to the public who might rely on them. I accept entirely the need for flexibility, but I remain to be convinced that moving towards a negative position rather than a positive position through an affirmative vote in this House is the way to achieve that. As my noble friend Lady Drake pointed out, where there is a need for quick action to apply, there are procedures within the House to enable that. We are trying to support collective benefit schemes, and we want to ensure that they are properly scrutinised on behalf of the public.
	However, the Minister said that he will be bringing forward amendments on Report. We shall reflect on the comments he has made on the issue and on why the Government consider that the negative procedure is appropriate. We shall think further about whether that is an acceptable position or whether we want the opportunity for further scrutiny through the affirmative procedures of this House. In the light of the comments made and the opportunity for further debate at a later stage, I beg leave to withdraw the amendment.
	Amendment 2 withdrawn.
	Clause 8 agreed.
	Clause 9: Duty to set targets for collective benefits
	Amendment 3
	 Moved by Lord Bradley
	3: Clause 9, page 5, line 2, leave out “or managers”

Lord Bradley: My Lords, the three amendments in this group stand in my name and in the name of my noble friend Lord McAvoy. Amendment 3 would remove the words “or managers” for collective schemes. In doing so, trustees would be required to be in place. Amendment 20 to Clause 37 would require managers to act in the best interests of members of the scheme, which seems an absolute minimum if they are to be relied on. Our proposed new clause sets out that trustees shall have a,
	“fiduciary duty towards members of the scheme”.
	That is an issue which will be debated here and further, and we believe it is essential for the confidence of schemes going forward.
	It is my contention that the Bill does not go far enough on governance. The highest standards of governance are needed for schemes that could be even more opaque to their members than DC schemes are
	now. They have to manage pooled assets and, within that, conduct smoothing arrangements for the benefit of all members. This silence in the Bill occurs despite the Government’s consultation entitled,
	Reshaping 
	W
	orkplace 
	P
	ensions for 
	F
	uture 
	G
	enerations
	. Paragraph 22 states:
	“Collective schemes are complex and can be opaque—because of the indirect relationship between contributions and benefits. This necessitates strong standards of communication and governance. We intend collective schemes to be overseen by experienced fiduciaries acting on behalf of members, taking decisions at scheme level and removing the need for individuals to make difficult choices over fund allocations and retirement income products”.
	Failure to require all schemes to have high-quality trustees means that we potentially have some collective DC schemes run by trustees and others where private firms offer them. They could seek to maximise short-term returns that are not necessarily in the best interests of all members. We have consistently argued that all workplace pension schemes must be run by trustees and have a legal duty to prioritise the savers’ interests.
	Our proposed new clause would require pension schemes to appoint a “board of independent trustees”. Those trustees would have a fiduciary duty to pension holders that would take preference over any duty owed to shareholders. This change in governance is designed to ensure that members of pension schemes get far better value for money. For example, in its market study, the Office of Fair Trading said that savers were not getting value for money in a contract-based market. A significant reason for that was shareholder interest in contract-based schemes predominating over the interests of savers. Not enough information is available on how schemes are operating and what is available. As has been said, it can be complex and difficult to understand, which is what stops this market functioning in order to bring down those costs.
	International evidence, such as that laid out by Chris Curry, director of the Pensions Policy Institute, during the evidence sessions, suggests that a trust-based approach to schemes is preferable and leads to better governance. It would not require a large number of trustees to implement. Of the 200,000 schemes currently estimated to be in place, many are under the management of four or five insurance companies and therefore would be covered by governance boards made up of trustees attached to those boards. Of the remaining pension schemes, progress to trusteeship might be slower. Equally, it might be aided by the amendment to be discussed later when we will encourage scale in terms of pension schemes.
	Through these amendments we want to ensure that there is strong and effective governance, that the trustees have a fiduciary duty to look after the interests of members as a priority, and that customers are treated fairly to ensure that their interests are prioritised over those of shareholders where there may be a conflict. The new clause that we have suggested would help to rectify the current shortcomings in governorship and, with the ability to appoint high-quality trustees in whom the members can have absolute faith, strengthen the whole process. I beg to move.

Baroness Drake: My Lords, I rise to support and speak to Amendment 10 in particular. I expressed the view at Second Reading that at some point, unfortunately
	probably later rather than sooner, the Government will inevitably have to place in statute a clear fiduciary duty on pension providers and asset managers to put savers’ interests first.
	Why one goes through all the regulatory complication of setting up independent governance committees, giving them fiduciary responsibilities to monitor the behaviour of private pension providers, while exempting the private providers themselves—the people who make and implement the decisions—from such responsibility is a little beyond me. If the responsibility of the independent governance committees is an attempt to align scheme governance with the interests of savers, why should that responsibility not be put directly on to the decision-makers in the pensions industry? But we are where we are.
	John Kay, in his review commissioned by BIS, also concluded that all those looking after someone else’s money or advising on investment should be subject to fiduciary standards of care. Many times from these Benches I have argued the case for extending a clear fiduciary duty to those who have discretion over the management of other people’s money. It is a principle that the Australian financial regulatory system has embraced and applies to retail pension providers, including an unequivocal requirement that conflicts of interest must be resolved in the beneficiaries’ interests.
	Each time I try to present the arguments in a slightly different or novel way but increasingly the FCA appears to be providing the arguments for the proposition. We have had numerous reports on how the market is not serving pension scheme savers well, be it legacy schemes, annuities, lack of transparency on charges, and many other examples. The new FCA study, which examined how market conditions may evolve from April 2015, found that greater choice and potentially more complex products will weaken the competitive pressures on providers to offer good value. The chair of the FCA has said that the increase in regulatory rules has failed to prevent misconduct and does not seem to “prevent further problems arising”. The FCA director of enforcement and financial crime, Tracey McDermott, speaking at the FCA’s recent enforcement conference in London, referred to the need for a cultural shift among firms similar to the change in public attitudes whereby drink- driving was, in the past, avoided through fear of being fined, but is now seen as a moral issue.
	It is clear from the flow of pronouncements from the FCA that the behavioural and cultural challenge within the pensions industry remains a major issue. They are telling us and demonstrating to us that regulatory rules have failed to deliver the cultures that embrace the ethic of care towards the customer. Time after time, reports, reviews and investigations confirm that the private pensions market is dysfunctional, with a weak demand side that cannot be expected or fails to self-remedy, and where the process of trying to provide for the savers’ interest in a competitive fashion does not work well. One is tempted to ask: how many reports of market failure in the pensions market do we have to receive before it is accepted that writing yet another set of rules will not solve the problem? What is needed is a game-changer to force the pace of
	change in providers’ behaviour by strengthening in law the principle that they must act in pension savers’ interests.
	The advent of auto-enrolment raises the bar. At the heart of the governance structure for the private pension system must be the interests of the pension saver, and the law must require that providers identify and manage conflicts in favour of the saver. An alignment of interests is not sufficient. The saver’s interests must come first. It will be a major regulatory failure of public policy if millions of citizens are auto-enrolled into pension schemes but Parliament has not ensured that sound governance is in place.
	Turning specifically to collective benefit schemes, which Amendment 10 targets, the case for the oversight of the management of such schemes resting with trustees with a clear fiduciary duty to the members of the scheme that takes precedence over other interests is even more compelling. Collective DC schemes are more complex in that they are designed to smooth income and manage intra- and intergenerational risk-sharing between members. The individual does not have a well defined pot over which they have individual ownership. Consequently, transparency is a key challenge and provides a potential breeding ground for conflicts of interest. Collective benefit schemes do not automatically guarantee higher retirement incomes. In order to be sustainable, collective DC schemes need scale, an assured flow of new members, full transparency and, in particular, excellent governance. If these schemes are not well run or if risks are unfairly shifted—for example, across different age cohorts—young savers could be subject to lower payouts.
	The Bill has a significant number of delegated powers so there is much still to be understood. On governance for collective DC schemes particularly, the Bill is largely silent. But the complexity of what needs to be addressed is captured in Clauses 9 to 18. The Government appear to recognise the particular nature of the governance challenge in collective benefit schemes and the possibility that things could go wrong because they have added Clause 37 to enable the Secretary of State to impose a duty on managers of collective benefit schemes to act in members’ best interests. But that is not sufficient. If the Government are serious about encouraging and building collective benefit pension provision, the governance rules have to be robust right from the very beginning. The risks are too great to do otherwise and that means requiring a body of independent trustees with a clear fiduciary duty to the members of the scheme, which takes precedence over any other duty, to oversee the running of such collective benefit schemes.

Lord Bourne of Aberystwyth: I thank noble Lords who have participated in the debate on these amendments. The amendments in this group all relate to governance, and the Government recognise and agree that governance is key to effective choice in the pensions arrangements that are being brought forward. The amendments relate to governance in relation to various types of pension schemes in some way, shape or form, and, as I say, the Government recognise and agree that this is important. However, we believe that the new measures that we are delivering under the Bill, under the
	Pensions Act 2014 and under the Financial Services and Markets Act, as well as the proposed draft Financial Conduct Authority rules, seek to address the concerns raised in the most appropriate way.
	Under powers in the Pensions Act 2014, this Government are introducing a new approach to governance standards for all workplace occupational pension schemes. These will come into force from April 2015. The Government’s commitment to improving the governance of workplace pension schemes was demonstrated in the Pensions Act 2014 and in the subsequent publication Better Workplace Pensions: Putting Savers’ Interests First, which was launched on 17 October last year. This confirmed the Government’s plans to introduce governance standards in all workplace money purchase occupational pension schemes from April this year.
	The Financial Conduct Authority has also completed a consultation on draft rules for independent governance committees for workplace personal pension schemes, to ensure oversight of these schemes in members’ interests from April this year. These proposals are built on an earlier agreement between the Association of British Insurers and the Office of Fair Trading to establish independent governance committees, and go further by introducing these on a mandatory footing.
	The October command paper also included a consultation on draft regulations to place minimum governance standards on occupational pension schemes which are money purchase or have money purchase elements to them. This consultation ended on 14 November 2014, and the Government are currently considering the responses. Subject to parliamentary approval and any changes as a result of the consultation, the governance measures in these regulations will commence from April this year. This is in response to the Office of Fair Trading which, after completing its market study in the summer of 2013, proposed minimum governance standards for workplace pension schemes.
	I want to make it clear that the Government believe that the right way is to build on the current landscape. It is critical that legislation acts to support the market to flourish and also to ensure appropriate protection for members. However, the amendment—as we read it—could mean a radical and expensive reformulation of the ownership of funds which are not currently held under trust.

Lord Bradley: I am grateful to the Minister for giving way. I want to be absolutely clear on the point that he was making about the regulations that have been brought forward for implementation from April 2015. They will apply to the new arrangements in the workplace schemes and the board of managers or trustees who will be responsible for them. First, will they be comprehensive in their coverage at that point, including any new collective benefit schemes that come forward soon after April? Secondly, will there be a fiduciary duty on that body to act in the best interests of members, as opposed to other interests?

Lord Bourne of Aberystwyth: I shall deal with the second point first. As the Minister knows, there will be a contractual obligation with contract-based schemes, but there will not be a fiduciary duty. This is because the essence of a fiduciary scheme with trustees is that fiduciary duties are held by those trustees. A contract-based scheme will have contractual duties which may be greater or lesser than the fiduciary duties, but they are somewhat different. Perhaps I could come back later to the noble Lord with a detailed answer on his point about collective schemes, because I am not quite sure of the scope of that particular aspect.
	Coming back to the serious point that I was making, this reformulation of ownership of funds could result in significant obligations. We need to be clear that, if this is the approach of the Official Opposition, then those are radical changes that will require quite an upheaval in the ownership of the way that the market is organised at the moment. I am not quite clear whether the Government have got it right that that is the basis of the amendment and the Opposition are going that far.
	Turning to the point that I think the noble Lord, Lord Bradley, was making, we do not want to dictate that non-trust based schemes should no longer have a part to play in pension provision in the workplace. I am not sure whether I have understood that correctly and that is indeed the position of the Opposition. We want to make sure that there is appropriate protection in occupational and personal pensions, trust and contract-based schemes. We want to encourage innovation and not necessarily restrict to a single structure, because we think we can provide appropriate protections across the piece. Similarly, under the provisions of this Bill, schemes offering collective benefits and defined ambition schemes can be trust or contract-based, and can be occupational or personal pensions. It has been suggested in discussions outside this House that such schemes should be restricted to trusts—I do not know whether that is the Opposition’s position. Again, we recognise and respect the concern about and focus on governance—that is quite right—in respect of these provisions, but we do not wish unnecessarily to close down options for how such schemes must be set up in terms of trustees. We have already made separate governance provisions for these benefits and schemes, recognising the new types of risk that they bring. Instead, we want to encourage providers to consider entering this space with innovative products that consumers want, and we have separate, parallel governance provisions for this which we will come on to later.
	On the point raised by the noble Lord, Lord Bradley, independent governance committees apply to money purchase benefits. We have other requirements for collective benefits under clauses in Part 2 and in Clause 37, to which we will come later.
	It is important to be clear that a requirement to have trustees is not a panacea for the myriad of governance issues that we are debating today. Let us not assume that all trust-based schemes are always better governed than contract-based workplace pension schemes. While we value the role of the many good, indeed excellent, trustees running occupational schemes, we recognise that schemes are variable and the presence of trustees is no panacea for poor governance. There is
	no evidence that one governance structure necessarily or always delivers better outcomes than another. We consider that factors such as scale—which we will consider later—good governance and charge levels are among the key determinants of member outcomes, not whether a scheme is contract or trust based.
	The governance of contract-based schemes has grown significantly stronger in recent years, led by the FCA with the “treating customers fairly” principles which have formalised firms’ responsibilities to their customers. The introduction from April 2015 of independent governance committees with a duty to act in members’ interests will further strengthen the governance of contract-based schemes. These points taken together are why we strongly believe that current measures and independent governance committees, rather than trustees, are the right response to money purchase contract-based or personal pensions.
	The proposed new clause would also be a significant cost and burden for workplace personal pension schemes. Data from the National Association of Pension Funds show that just under half of the 1,200 schemes that it surveyed in 2013 had independent trustees and that trustee salaries range from about £10,000 to £35,000 a year, although it is true to say that not all trustees or trustee chairs are paid. Therefore, as your Lordships can appreciate, there would be considerable cost involved in increasing this figure particularly over the short term. It could even mean that trust-based schemes had to replace their existing trustees.
	We have made separate provision for governance measures for collective benefit and defined ambition schemes, so we do not need independent trustee committees as well. The independent governance committee measures will apply to money purchase benefits, but we have made separate provision for the other schemes. Generally, provisions under Part 2 set out a number of regulation-making powers to make requirements in respect of key governance features: investment, factors affecting benefits, policies for dealing with deficit and surpluses, transfer values and so on.
	More specifically, under Clause 37, referred to by the noble Baroness, Lady Drake, we have a regulation-making power that may require managers in non-trust based schemes to have a duty to act in the best interests of members when taking specified decisions in shared risk schemes and schemes offering collective benefits. This is because of the new types of risks that may arise in these new types of shared risk schemes and schemes offering collective benefits, which are different from money purchase benefits or defined contribution schemes. Therefore, Clause 37 takes a regulation-making power to impose a duty on managers of non-trust based schemes to act in the best interests of members when taking specified decisions.

Lord Bradley: On Clause 37 and the Minister’s assurance of the robustness of the independent boards, why is he resisting our amendment which says that managers “must” take those powers and apply them in the best interests of members, rather than only “may”?

Lord Bourne of Aberystwyth: This is probably the main difference between the approaches of the Government and of the Opposition. I do not think that we are miles
	apart on our desired outcome, but we believe that working with the industry, consumer groups and pension groups to achieve the best interests is the right way forward. If we can achieve the same end without making it mandatory, we believe that that is the right approach. It is probably at the root of the difference between the two parties that we believe that we are achieving the result without having to make it mandatory.
	I recognise the spirit behind the amendment that has been brought forward and the Government accept the need for the appropriate corporate governance. Whether it is in relation to trust-based schemes or to contract-based schemes, we want the similar result of the managers or the trustees acting in the best interests of the pensioners. I want to reassure noble Lords that the matter that this clause deals with is of great importance to the Government, and we are working with the industry and the Financial Conduct Authority to ensure that we get the approach right.
	On Amendment 3, which would change Clause 9, let me set out some context on Clause 9 and why we think that the amendment would undermine a key governance provision. Clause 9 sets out a regulation-making power which may require trustees or managers of schemes offering collective benefits to set targets in relation to any collective benefits that may be provided by the scheme. Ensuring that there is a target in relation to collective benefits offered by the scheme should enable the member to have a realistic picture of the benefits that they are likely to receive. This is important, as the member is handing over control of their investments to those running the scheme. A target will also help those who wish to plan for their retirement income to do so meaningfully.
	Removing the ability to require managers to set targets, which is what the amendment would do, would undermine a key provision which provides additional governance and transparency about members’ collective benefits. The requirement to set targets in relation to collective benefits in Clause 9 works closely with the other aspects of the governance regime set out in Part 2 of the Bill. For example, it is our intention that the probability of meeting the targets will be assessed annually in a valuation report to identify whether it falls within a specified probability range. If it falls outside this range, this will trigger the scheme’s policy for dealing with a “deficit” or “surplus”.
	I think that we all agree that good governance of pension schemes is essential. That is why the Government’s new governance standards, applying across all workplace pension schemes in respect of money purchase benefits, will protect members by ensuing that schemes are run in their interests. It is also why we have introduced Clause 37: to ensure that there is extra protection for members’ interests.
	However, the Government are taking a proportionate approach and seeking to allow constructive forms of innovation by pension providers, as well as retaining flexibility to ensure that regulation remains up to date with changing requirements. On that basis, I respectfully ask noble Lords not to press their amendments.

Lord Bradley: Once again, I am grateful to the Minister for the comprehensive nature of his reply. I am sure that Hansard will correct that I am not the
	Minister—sadly—and probably never will be. We have slightly strayed into the next amendment, Amendment 4, on targets, so I will return to that when we debate that amendment to Clause 9.
	Our purpose throughout is to ensure that members’ interests are protected, as the noble Baroness, Lady Drake, has clearly and effectively outlined. We are trying to ensure sound governance. The Minister has given assurances that the proposals being brought forward will achieve the same objective as our amendment. I will reflect on the issues that the Minister has raised and his sense that our views about trustees are not as soundly based as we believe they are. There will be an opportunity for that reflection before Report. In the light of those comments and the strong feelings on this side of House regarding trustees, at this stage I beg leave to withdraw the amendment.
	Amendment 3 withdrawn.
	Amendment 4
	 Moved by Lord Bradley
	4: Clause 9, page 5, line 23, at end insert—
	“( ) A statutory instrument containing regulations under this section which is the first exercise of such a power may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

Lord Bradley: Amendment 4 stands in my name and in that of my noble friend Lord McAvoy. Again, it flows from the recommendations of the Delegated Powers Committee. We have already had a response from the Minister about how the Government are handling this, but in the light of his preliminary comments about targets I think it is still worth our having a brief debate on this amendment.
	The Delegated Powers Committee suggested that because of the nature of the powers in clause 9, which may require the trustees or managers of a pension scheme to set targets in relation to collective benefits, the affirmative procedure on first use would be most appropriate.
	This clause is particularly important, as it raises many of the key areas that we wish to discuss around CDC schemes; indeed, we have already started to discuss them. These are issues such as the balance of intergenerational risk-sharing, the communication of the “risks of risk-sharing”, the importance of good governance in these schemes so that they can command sufficient trust from their members—a subject about which we have already had some discussion—and the role that actuaries are likely to play in the process.
	The Secretary of State is here given the power to require a target that meets a set probability. For instance, if the probability was set at 98%, the target would have to take that into account and be set at such a level that there was only a 2% chance that it would be missed. To reflect on the most controversial aspect of CDC schemes—as I have made clear, the Opposition support these schemes—we have to look at what happened in
	Holland, where because of the financial crisis, pension payments had to be reduced. It is therefore important for us to look at targets and ranges, so as to give assurance to the schemes.
	The Minister in the other place said that the regulations produced under the powers conferred by Clause 9 were to be subject to consultation. Can the Minister provide any further detail on when the consultation is likely to begin, and say whether the Government will be expressing a preferred option and asking for comment on that—and if so, what the preferred option is likely to be?
	Because of the reasons that I have set out, communication to scheme members about how the target level is set and what factors could lead to it being altered is particularly important for these schemes. Can the Minister provide us with any more details on how the Government believe this can best be expressed to give scheme members confidence in the decisions being made?
	This issue also takes us into the area of governance. The kinds of decisions that have to be made about targets and probabilities, and about how all this translates into the level of pensions paid out in a CDC scheme, require a high level of trust in the process—the kind of trust that is more easily established through a scheme being overseen by trustees rather than managers. But we have already rehearsed that argument, and I shall not go over it again.
	Can the Minister provide us with any more detail on the interaction between the actuaries and the trustees or scheme managers under this provision? For instance, if the actuary gives advice that the probability of meeting a target falls outside the probability level set by the regulations, what options will be available to the trustees, in terms both of the action they can take and of how they communicate this to the scheme members? I acknowledge that this is a complex area, and the challenge of adequately communicating why a certain decision has been made is often considerable.
	We understand that the Government cannot pre-empt a consultation that has not begun, and also that this Bill is not unique in being a piece of pensions legislation that confers a wide degree of delegated powers. However, it is still unsatisfactory if those powers are not before the House to be debated alongside the primary legislation. The huge range of options left open by this clause means not only that it should be subject to the affirmative resolution when the Government produce regulations on the matters within it, but that it would be useful if the committee were able to piece together the picture that the Government expect and hope will be in the regulations tied to the primary legislation, and see how they would impact on the important issues identified in Clause 9. I beg to move.

Lord Bourne of Aberystwyth: My Lords, I thank the noble Lord, Lord Bradley, for his comprehensive coverage of Clause 9. I shall deal first with the recommendations of the Delegated Powers and Regulatory Reform Committee, because that is the specific issue raised by the amendment. I shall then come back to some of the issues that the noble Lord raised in relation to the consultation process.
	Clause 9 sets out a regulation-making power, which is a key aspect of our approach to collective benefits. The issue of parliamentary scrutiny was considered by the Delegated Powers and Regulatory Reform Committee, and as I said before, we accept its recommendation on this matter, and we intend to come back to it on Report and table amendments to ensure that the first time the powers are used, this will be subject to the affirmative procedure.
	I confirm that the Government intend to have full open consultation on the regulations, which is expected to include discussions before the formal consultation takes place. Timelines will need to be agreed in due course. I suggest to the House that we come back to this subject in more detail on Report, so that we can consider the position in the round. Given the undertaking that we will table an amendment on Report on the specific issue addressed by Amendment 4, I invite the noble Lord to withdraw it.

Lord Bradley: Again,I am grateful to the Minister for his comments, and I welcome the fact that before Report stage we will get the detail that I sought through the amendment. It is important that we have that timeline for the consultation, so that there is clarity, both in the House and outside it, about what the process will involve. As the Minister has recognised, Clause 9 is crucial to this part of the Bill, and we need as much information as possible, and the opportunity to debate it, before the Bill passes through all its stages in this House. In the light of the Minister’s assurances, I beg leave to withdraw the amendment.
	Amendment 4 withdrawn.
	Clause 9 agreed.
	Clause 10: Policy about factors used to determine each benefit
	Amendment 5
	 Moved by Lord McAvoy
	5: Clause 10, page 5, line 36, at end insert—
	“( ) A statutory instrument containing regulations under this section which is the first exercise of such a power may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

Lord McAvoy: My Lords, I shall speak to Amendments 5 and 6. They follow recommendations made by the Delegated Powers and Regulatory Reform Committee, which suggested that, on first use, the affirmative rather than the negative resolution process should be used. We agree. Despite the Government’s claim in the delegated powers memorandum that Clause 10 does not require affirmative resolution as the amendments would be “technical” and “procedural”, it would be good to hear further detail about the circumstances in which it could be used. Does the Minister see the power as a backstop that can be relied on in the event that a scheme manager is not considered to be acting in the best interests of the scheme members or has taken a decision that is likely to disadvantage them?
	Clauses 10 and 11 are part of a larger group of clauses introduced on Report in the other place. As a result, on that and other points it is up to this Committee to ensure adequate scrutiny and ensure that there are no flaws in the drafting. In debating the provision, the Minister in another place said:
	“We cannot do an impact assessment because we have not yet written the regulations”.—[Official Report, Commons, 25/11/14; col. 805.]
	That is a slightly unsatisfactory way to legislate. Likewise, in explaining why so many amendments were produced late on, the Minister relied on the need to alter the Bill dramatically following the introduction of pension freedoms in Budget 2014. The fact that that was not anticipated suggests that something was left to be desired when it came to joined-up government thinking. We want parliamentary debate and scrutiny of the regulations published under the clauses following the conclusion of the Government’s consultation. On that basis, I beg to move.

Lord Bourne of Aberystwyth: My Lords, I thank the noble Lord, Lord McAvoy, for introducing the amendment. First, I confirm that the Government agree with the recommendations of the Delegated Powers and Regulatory Reform Committee. We will be tabling amendments on Report to make the powers in Clauses 10 and 11 subject to the affirmative procedure the first time that they are used. Regulations made under Clause 10 will require trustees or managers to set out and follow their policy for how the collective pool will provide collective benefits to individual members.
	There is another high-level requirement on which we may wish to regulate for that we have set out powers in Clause 10, and that is the matter of how each benefit is determined. The effect of regulations under Clause 24, which we will come to later, will be that trustees or managers must use the funds held for the provision of collective benefits—less any specified scheme expenses—to provide collective benefits. How the amount paid to a member is determined is the issue to be addressed. We expect the scheme to set out the rules as to how it will operate. The way that the scheme manages certain matters will need to be clear.
	Regulations made under Clause 10 will therefore require trustees or managers to set out and follow their policy for how the collective pool will provide collective benefits to members. That is because, although with a collective benefit there is no certainty about what a member will receive, we want to ensure that decisions about how benefits are calculated are transparent. Transparency is of the essence. That is not to determine benefit design but to recognise that with a collective benefit there may be redistribution of assets between members, smoothing of returns and so on, and we want that to be an open process.
	The specific clause, however, focuses on policies applied to determine each benefit. Regulations made under the clause may set out matters that the trustees or managers must take into account, or principles they must follow, in formulating the policy. We might want to use this power, for example, to require that trustees or managers have regard to the level of contributions paid to the scheme by members. Although the level of contributions towards collective benefits made by an
	individual member is not the only factor that will determine what the level or amount of that member’s benefits will be once they come into payment, it is important that there is some link between the level of contributions made by or on behalf of the member and the level or amount of benefit that the member receives from the scheme. That is how we hope to address that point.
	As with the other requirements for scheme policies outlined in Part 2, the regulations made under the clause may also require the trustees or managers to consult about the policy and make provision about the content of the policy and about reviewing and revising the policy. I hope that I have explained how the powers in Clause 10 will help to ensure consistency in how the scheme will operate and give clarity to members and prospective members about how their share of the collective pool will be calculated.
	Meanwhile, the regulation-making power in Clause 11 provides a power to make provision about the factors to be used to determine each benefit. That will allow us to set some parameters within which a policy required under regulations under Clause 10 operates. As I have explained, the principle underpinning a collective benefit is that all members should be able to expect their benefits, which are paid from the collective pool, to be calculated in a consistent and fair way. Clause 10 provides for regulations to require trustees or managers to have a policy about the factors used when calculating the level or amount of collective benefits to be paid and makes certain provisions around that. Clause 11 is linked to that. The regulation-making power in Clause 11 provides a power to make provision about the factors to be used to determine the amount available for the provision of each benefit. That will allow us to set some parameters within which a policy required under regulations made under Clause 10 operates.
	The requirements about the factors used to determine the benefit could therefore include: contributions paid by or in respect of the member, including amounts paid in by way of transfers into the scheme; the value and types of assets held by the scheme, actuarial factors, such as estimated investment returns and longevity; the potential impact of paying benefits at that level on members in different cohorts; and the target and position in relation to probability requirements. The list of factors to be prescribed in regulations will be developed following consultation with the pensions industry and members’ groups.
	The Government agree with the recommendations of the Delegated Powers and Regulatory Reform Committee, as I said to the noble Lord. I hope that I have covered the points that he raised. In the light of that, I respectfully ask him to withdraw the amendment.

Lord McAvoy: My Lords, I thank the Minister for his lucid explanation of the clause and his response to my amendment. I very much welcome the pledge to move amendments at a later stage that will keep the spirit of these amendments.
	This is the first time that I have moved an amendment to legislation from the Dispatch Box, and I feel that I should now just pack up and go home—I have done enough to escape without criticism. I appreciate the Minister’s attitude and flexibility on this and beg leave to withdraw the amendment.
	Amendment 5 withdrawn.
	Clause 10 agreed.
	Clause 11: Power to impose requirements about factors used to determine each benefit
	Amendment 6 not moved.
	Clause 11 agreed.
	Amendment 7
	 Moved by Lord Bradley
	7: After Clause 11, insert the following new Clause—
	“Scale of pension schemes
	(1) The fiduciary duty of pension scheme trustees shall include a duty to consider whether the scheme has sufficient scale to deliver good value for members.
	(2) Where trustees take the view that the scheme has insufficient scale, they must consider whether merger with another scheme would be in the members’ interests.
	(3) The Pensions Regulator shall have power to direct merger of pensions schemes where it would be in the interests of the members of each of the relevant schemes for merger to take place.
	(4) The Pensions Regulator shall exercise this power in accordance with a methodology on which it has publicly consulted and which has been agreed with the Secretary of State.
	(5) The methodology set out in subsection (4) shall be kept under regular review and revised when necessary, subject to further consultation and agreement from the Secretary of State.”

Lord Bradley: The amendment is in my name and that of my good colleague, my noble friend Lord McAvoy, who will continue to support me through the process of the Bill. This is also the first day that I have been at the Dispatch Box moving amendments, though we are a double act that flowed through the other place for many years.
	The amendment is encapsulated in its first line:
	“The fiduciary duty of pension scheme trustees shall include a duty to consider whether the scheme has sufficient scale to deliver good value for members”.
	Our proposed new clause would give the Pensions Regulator, along with the trustees of such pension schemes, the power to consolidate pension schemes.
	The Pensions Regulator has been clear that scale is to be encouraged as it enables schemes to achieve better value for money, higher quality governance and economies of scale. Scale is very important in reducing the cost of intermediation. The key report by John Kay for the Department for Business, Innovation and Skills recommended a reduction in intermediation. He made it clear that there were far too many intermediations and scale could be a trigger for in-house asset management. Evidence from abroad supports this view.
	For example, in Canada, scale means that schemes do not necessarily have to pay private equity houses and agents in order to buy private equity.
	There is a general view that there are currently too many schemes—around 200,000, it is estimated—and the proposed new clause would enable this to be reduced by giving trustees the power under their fiduciary duty to recommend merger if it is in the best interest of the scheme, and enables the Pensions Regulator to take action if it believes small schemes are not obtaining value for money. Currently, the Bill contains no measures which would help promote scale, which most independent observers believe is necessary for collective DC schemes and work-based pensions in general to do the best for their employees. We have long argued that measures to promote scale are vital to ensure the best outcomes for savers, and those measures deal with the important issue of finding high-quality trustees. If there are fewer schemes, there is less need for a large number of trustees and we therefore address the quality as well as the quantity in schemes that are currently in place. The Government could, for example, require that automatic transfers default into aggregators, and the criteria necessary for qualifying as an aggregator could include scale.
	The House of Commons briefing note on the Bill states:
	“However, certain conditions such as large scale and strong governance appear necessary for DC schemes to operate successfully”.
	Further, three-quarters of respondents to the consultation prior to the Bill thought there was a need for government intervention to create the scale necessary for schemes to offer proper guarantees.
	To sum up, it is our view and the view of the Pensions Regulator—which was set out in evidence—that there has to be a scaling up of the UK pensions industry. At the moment there are far too many schemes. We want a process in place to try and reduce that and build up scale. Our proposed new clause would not by any means reduce the number to a handful but it would make a start by giving powers to trustees and the regulator to promote scale. It would be a sensible addition to the powers of trustees and the regulator. Given the widespread consensus in the pensions industry that scaling up will have to happen, and that in so doing costs would be reduced and there would be a better outcome for savers, I believe that the Government will wish to support this amendment and therefore I beg to move.

Lord German: Perhaps I might pose a number of questions about this amendment. My noble friend the Minister or the noble Lord, Lord Bradley, might like to reflect on them and give me an answer. First, the trend towards larger scale pension funds is growing. I understand that the number of smaller schemes is declining. I wonder if one or other of the noble Lords could tell me what the pace of that change has been and whether forcing mergers is necessarily the right thing if that pace of change is already accelerating. Secondly, when mergers are forced, the question is who that merger is with. Who will be found as a necessary partner to move in that direction? If that partner were a smaller scale operation as well, forcing those two to move together might not necessarily
	provide the right output. Finally, scale does have merit and is worthy, but that does not mean that small scale is always bad. I wonder whether we should always look for quality rather than scale or the force to make companies move together. Those are fundamental questions which I hope one or other of the noble Lords will be able to answer.

Lord Bradley: If I might comment briefly, as the amendment says, any merger has to be in the best interests of the members. It is not being forced if that is not in their best interests. I am not aware of the pace of change; what I am saying is that the industry is looking at those measures. The fundamental point is that it is in the interest of the members, not the scheme itself.

Baroness Drake: My Lords, I have sympathy with the thrust of my noble friend’s Amendment 7. Scale can be very important in influencing efficiency of pension provision and value for money for the pension saver. We also know that there is a significant tail of small DC and DB schemes which could actually increase if we begin to see an accelerated closure of trust-based DC schemes in response to the new freedoms. That is a problem to be monitored and addressed as part of protecting savers’ interests.
	In principle, putting small inefficient schemes into large efficient schemes is a good thing but as the noble Lord, Lord German, flagged, the path to achieving that can sometimes reveal some real difficulties. As a trustee I have experienced this. The problem arises when considering what a small scheme is transferred into. In real life, some real pressures come to bear. For example, an employer may be keen to see members of a closed, small trust-based DC scheme bulk transfer into a contract-based product, but if that product is a personal pension which falls outside the scope of the new charges cap or the quality standards, the value for money and governance benefits on transfer may not be so clear-cut. Equally, the trust scheme rules of small schemes, even in DC, may have some beneficial provisions. For example, the employer may meet the administration costs, so some of the costs of that DC provision are met by the employer. What happens to that protection on transfer?
	Certainly, the principle of promoting scale consequentially to promote value for money is a good one. However, if there is to be a provision to require trustees to transfer their schemes in certain circumstances, there needs to be regulatory clarity about the standards of schemes into which schemes can be transferred or directed by the regulator—whether there are nominated aggregators or whatever into which a regulator could so direct if it felt that something was quite small and unsustainable. The principle is sound but, like any principle, the path of getting there sometimes needs some additional support. I flag those up as issues that would need to be captured in making any regulatory provision about forcing the pace on scale.
	I can speak only from an anecdotal basis to the point made by the noble Lord, Lord German, about evidence. I cannot provide any evidence. I can provide only experience. As employers have tackled their big
	DB benefits and addressed auto-enrolment, I think they are looking to consolidate or transfer out small schemes, so I expect this to be a growing issue—but I express that view on an anecdotal basis.

Lord Bourne of Aberystwyth: My Lords, I thank noble Lords who have participated in the debate and I welcome the opening remarks of the noble Lord, Lord Bradley, who is part of a dream team with the noble Lord, Lord McAvoy—a dream team for the Opposition, if I may correct my earlier slip of the tongue. In response to the point that was dealt with by the noble Baroness, Lady Drake, and raised by my noble friend Lord German, I am told that there are no published figures on mergers but, anecdotally, it certainly seems the case that there is a trend. Whether that would continue with the new reforms is another issue but I think that there is, anecdotally, such a trend at the moment.
	The amendment would impose a fiduciary duty on trustees of pension schemes to consider whether the scheme is of a scale to deliver good value to members and, if not, to consider a merger with another scheme. The Government are interested in scale, in so far as it may help schemes to improve quality and lower charges, and to be fair, I am sure that that is what inspired Amendment 7. However, we are not interested in scale as an aim in itself. The Government believe that forcing scale does not necessarily drive good governance, investment expertise or low costs. Big is not necessarily beautiful, as my noble friend Lord German correctly suggested. On occasion, many small schemes are delivering very effectively.
	Our analysis of the current defined contribution landscape shows that there are already effective benefits of scale operating within the marketplace, including significant consolidation of schemes. We have no precise figures on that but we expect this to continue and probably to accelerate as smaller employers are brought into automatic enrolment. Indeed, we have already seen smaller employers moving towards larger arrangements such as group personal pensions, master trusts and the National Employment Savings Trust. They can also access the benefits of scale by purchasing investment or administration services from a large provider, falling short of a full merger.
	Noble Lords may find it helpful if I try to explain to the House why we believe this amendment to be unnecessary and why the matter is not as straightforward as it may at first appear. A significant push to force consolidation would come at a financial cost which would be borne by members—at least the initial cost. Agreeing what “sufficient scale” means and policing it would be difficult. The amendment would create some inconsistency across the regulatory landscape as it would bite on trustees of trust-based defined contribution schemes but not on the managers of non-trust based schemes that are either a shared risk scheme or a defined contribution scheme. Significantly, and certainly from my point of view most importantly, it also cuts across trustees’ existing fiduciary duties to act in members’ best interests.
	Trustees are already required to pay particular attention to governance standards—for example, internal controls —investment governance and decision-making, administration practice in record-keeping, and preventing fraud and so on. As part of that, they may well consider the benefits of scale. Some employers may prefer a smaller scheme that can deliver bespoke investments and communications to their workforce which a larger scheme might not be able to do.
	The Government believe that their flagship reforms of introducing, for the first time, minimum governance standards to ensure that schemes are well governed with low and fair charges for members is the correct approach to drive better member outcomes. We do not believe that it would be right to interfere with how the marketplace is evolving, bearing in mind the existing fiduciary duties that trustees are acting under. It would be strange if trustees were not already considering the viability of the trust and the benefits of scale as they assess its workability.
	Finally, the amendment would give the Pensions Regulator a new power to compel a merger, if it would be in members’ interests to do so, and for the Pensions Regulator to use this power in accordance with methodology on which it has publicly consulted and which is agreed with the Secretary of State. The amendment requires this methodology to be kept under regular review. This, too, would impose new burdens and is unnecessary. Agreeing what “sufficient scale” means in members’ best interests, and measuring and policing it, would be very difficult. We believe that new governance standards from April 2015 will mean that trustees and managers will have a general legal responsibility to ensure that the schemes are well governed in members’ interests. As I say, it would be unusual if they did not consider, as part of this, the possibility of merger and the benefits of scale. In addition, the Pension Regulator’s existing regulatory strategy and activities include providing guidance and e-learning resources, and helping trustees to demonstrate that they meet the required standards of their defined contribution quality features. The regulator will also take enforcement action where necessary, under existing powers. This ranges from advice letters, warning letters, statutory compliance notices and monetary penalties to criminal prosecution.
	We believe that our focus on ensuring that schemes are well governed and deliver good quality and low charges to their members, regardless of size, is the correct approach to drive better member outcomes, while recognising that on occasion scale is of importance and that trustees should be considering that, as should managers. On that basis, I urge the noble Lord to withdraw the amendment.

Lord Bradley: I thank the Minister for his response to the amendment and I welcome the comments made by the noble Lord, Lord German, and my noble friend Lady Drake on the issue of scale. There is no intention in the amendment to force anything. Subsection (2) of the proposed new clause is clear. It states:
	“Where trustees take the view that the scheme has insufficient scale, they must consider whether merger with another scheme would be in the members’ interests”.
	That is the crucial point. It is not forcing it but looking at what is in the members' interests. The relationship between the trustees and members on governance is very important. This is about a mechanism to ensure that it is considered and that it is in the best interests of the members. We are not saying that big is necessarily beautiful but that, in certain circumstances, bigger might be better—better value for money for the members of the scheme.
	There is clearly some difference between the Government and the Opposition on this issue. I do not want to caricature the Minister’s response but he was basically saying that the market will decide and that mergers will happen because the market will determine that they happen.

Lord Bourne of Aberystwyth: I appreciate that the noble Lord was not intending to caricature my response and that I have cut in before he finished but I said that although we believe that the market is driving things in the direction of scale, it is the case that managers and trustees should be considering this as part of their duties. We are not simply saying that it is all about the market; we believe that the framework is already there.

Lord Bradley: I am grateful to the Minister for that clarification and I certainly was not intending to misquote what he was saying. However, there seems to be a difference between the active consideration of mergers and the more passive position from the Government in that determination “may” be governed by the influence of the market rather than through what we are saying in this amendment. Again, it is absolutely crucial to us on this side of the House—whether it be on governance, transparency or the way in which duties are imposed on trustees—that while being mindful of previous situations regarding pensions and difficulties in the market, we are always looking to get best value and protect the interests of the public throughout this process. However, in the light of the comments that the Minister has made and the opportunity for further consideration at a later stage, I beg leave to withdraw the amendment.
	Amendment 7 withdrawn.
	Clauses 12 and 13 agreed.
	Clause 14: Statement of investment strategy
	Amendment 8
	 Moved by Lord McAvoy
	8: Clause 14, page 6, line 29, leave out “may” and insert “must”

Lord McAvoy: My Lords, I shall also speak to Amendment 9. I do not have the reputation of having an unlimited supply of charm, so I shall use what I have left to try to work the oracle on these two amendments.
	Clause 14 allows for regulations to be made requiring scheme trustees or managers to prepare an investment strategy. Specifically, the regulations may include
	requirements on the content of the statement and on the reviewing and revising of the statement. Clause 15 allows for regulations to be made requiring the trustees or managers of a pension scheme to prepare a report about the performance of collective benefit investments. The regulations may include how often these reports need to be obtained and who the reports should be obtained from.
	The amendments to each of the clauses simply change the stipulation that the regulations “may” require this to a stipulation that the regulations “must” require this. In doing this, we inevitably return to the nature of the delegated powers in Part 2. The question is whether the Government can imagine leaving some of these powers unused when they come to issue regulations under this part of the Bill and, if so, which ones.
	The investment strategy for collective benefits is obviously a crucial part of these schemes. We have already discussed the fact that collective defined contribution schemes have the potential to offer investment strategies that perform better than individual defined contribution schemes. It is also important because research on the subject by the Institute for Public Policy Research showed that the feeling that contributions might be invested badly on savers’ behalf, leaving savers with relatively smaller rewards than they were expecting, can serve to disincentivise savers. As with other aspects of governance, trust in investment strategies is essential.
	Will the Minister say, first, whether the Government can imagine a circumstance under which they would not issue regulations requiring a statement of investment strategy to be prepared? Will he provide the Committee with any more detail on what the trustees or managers are likely to be required to do with the statement of investment strategy? Will it need to be made available to scheme members, for instance? The amendment to Clause 15 is in a similar vein. Can the Government imagine any reason why the regulations issued under this clause would not require an investment performance report to be produced by a trustee or scheme manager?
	There is also considerable concern about the wider question of what kind of information is made available in investment reports. For instance, the Minister in the other place was usefully able to say that information was likely to be available on transaction costs, but, less usefully, was unable to give any details as to which transaction costs would be laid out in an investment report. Ideally, we would like trustees to have access to enough information to be able to judge whether the investment is being managed as efficiently as it should be. I hope the Minister is able to shed a bit more light on that aspect of the clause. I beg to move.

Baroness Drake: My Lords, I support Amendment 8, which would require trustees or managers of a collective benefits pension to prepare a statement of their investment strategy in connection with any of their investments. The issue here is not that they “may” be required but that they “must” be required—that is the straightforward proposition in the amendment.
	The reason I came in when I read the amendment is that it seems to me pretty inconceivable that a collective benefits scheme would be allowed to operate without
	the preparation of such a statement, particularly given the way in which such a scheme is managing risk on a collective basis across and between different generations of savers, and where the individuals in the scheme do not have a well defined pot over which they have clear and individual ownership. I have to ask the Minister: when would one ever conceive of a situation where a statement of investment strategy was not required in a collective benefits scheme? An increased return on savings is not an automatic product of collective benefits schemes. Sound governance is the essential ingredient, which must include transparency and clarity on investment strategy.
	These schemes have to function very efficiently over the very long term for successive generations. Saving for retirement is typically a 30-year to 40-year project. Pension savings can become vulnerable, for example, to the irrational exuberances of a given set of trustees or managers at any one point in time as to how certain asset classes may perform. It was, after all, the exceptional equity returns of the 1980s and 1990s that led to the fool’s paradise of irrational exuberance about equity returns, which, when it came to an end because those returns were not sustainable, contributed to the closure of so many defined benefit schemes as the true cost of funding the pension promise was laid bare.
	Taking that theme, I think that it would be difficult to have confidence in the targeted benefits required of a collective benefits scheme and the sufficiency of the assets to meet those targets unless there is a clear statement and transparency on the investment strategy being pursued. In a collective benefits scheme it is important to have visibility of the investment beliefs, principles and strategy underpinning the decisions of the trustees or management, of the level of risk and volatility being tolerated and of how those views relate to the characteristics of the membership of the scheme and the obligations to the different age cohorts of members.
	The direction of travel of public policy on pension regulation, now that investment risk is increasingly transferred to the individual, is for greater transparency, clarity and accountability on investment decisions taken. With the sharing of risk between ordinary pension savers and across the generations in collective benefit schemes, the case for requiring trustees and managers to make clear statements on their investment strategy is even more compelling. I come back to my point that it is pretty inconceivable that a collective benefits scheme would not be required to prepare and publish such a statement. When could one ever conceive of a situation that would be different?

Lord Bourne of Aberystwyth: My Lords, I thank noble Lords who participated in the debate on this amendment. The Bill sets out a regulatory framework for collective benefits. Part 2 defines collective benefits and provides for a number of regulation-making powers. The Government’s intention is to produce a comprehensive set of regulations governing the day-to-day running and decision-making in schemes that provide collective
	benefits. This will include detailed provision around the statement of investment strategy and the investment performance reports that are the subjects of these amendments.
	The powers in Part 2 generally have been developed in consultation with the industry. While the Government have laid out an overarching regulatory structure for collective benefits, the consultation process will not stop with the introduction of primary legislation. The Government will continue to listen to industry views and the views of pensioners and take into account the experience of European pension systems. We have heard mention of the Netherlands and Denmark as well as other systems—Canada, for example—where collective arrangements are already in place.
	Members will be handing over control of their assets to the trustees or managers running the scheme in a way which differs from individual defined contribution schemes, where the members will usually have some direct choice and options. Also, because members collectively, rather than individually, bear the investment risk, there is a less direct relationship, compared to individual defined contribution schemes, about how the returns are attributed to individual members. It is therefore important that key requirements about investment are applied appropriately. It is important that there is clarity about what the investment strategy is, so that members can be clear about how their money will be invested collectively.
	That is why Clause 14 may require the trustees or managers of a pension scheme to prepare a statement of their investment strategy. This clarity is important, as those running the scheme will need to decide on the appropriate balance to be struck between risk where the returns are uncertain and assets that deliver a reliable income. I shall clarify the point that was raised about whether the Government could foresee a situation where we did not provide for regulations in a particular area: no, we cannot.
	The difference here is between “may” and “must”. We believe that driving this forward in the way that we are, in conjunction with the industry, is appropriate and that this is likely to deliver—indeed, will deliver—the best result. We are also conscious of the fact that on occasion we need to act quickly to make appropriate changes. I assure the Committee that it is our intention to ensure that there are regulations in relation to both the points raised in these amendments.
	I should also say that this is related to trust schemes. Further work and conversations are required with the Financial Conduct Authority to establish how it will regulate non-trust-based schemes offering collective benefits. It may be that it is more effective and appropriate for some of the regulation-making powers under Part 2 to be used in relation to occupational schemes only, and for the FCA to make parallel provision in relation to personal pension schemes. That is one reason, because of the two schemes going forward together, why we believe that the Government’s permissive approach is right, but of course we could always revisit that if we felt it necessary to do so. On that basis, I respectfully ask the noble Lord to withdraw the amendment, while acknowledging his continuing charm, which he referred to earlier.

Lord McAvoy: It is probably just a bit run down, but there we are. I am grateful to the Minister for that very full explanation. However, his response struck a chord in me and a note of concern when he indicated that he did not want the word “must” but rather wanted “may” after consultation with the industry. Assuming that they were asked whether the word should be “must” or “may”, they would say “may”, would they not? So there is a bit of concern that the Government have perhaps listened too much.

Lord Bourne of Aberystwyth: I am grateful to the Minister for giving way. As I indicated, the consultation is not just with the industry; it will also be with consumers, pensioner groups and so on. It is not limited to the industry.

Lord McAvoy: I am grateful for that clarification, but I still think that, although obviously I do not know how much weight was given to the industry’s point of view, the fact that the Minister kept some opinions in reserve and indicated that the Government would act at some point in future to change that suggests that there just might be something there. With that clarification, though, especially the clarification that the Government would be prepared to look at this again in the light of experience and circumstances, I beg leave to withdraw the amendment.
	Amendment 8 withdrawn.
	Clause 14 agreed.
	Clause 15: Investment performance reports
	Amendment 9 not moved.
	Clause 15 agreed.
	Clauses 16 to 18 agreed.
	Amendment 10 not moved.
	Clauses 19 and 20 agreed.
	Clause 21: Policy for dealing with a deficit or surplus
	Amendment 11
	 Moved by Lord Bradley
	11: Clause 21, page 9, line 3, leave out “may” and insert “must”

Lord Bradley: My Lords, I will not labour the points that we have already made regarding affirmative resolutions of regulations, but I shall speak briefly to Clause 21 because it is another key clause in shaping the structure and policies of pension schemes that are to be developed under Part 2. This is another area that, as we know, the Delegated Power Committee picked out when it said that,
	“the likely ingredients of regulations will be so significant to the working of Part 2 as a whole that the negative procedure will not afford the House an appropriate opportunity to debate the provision that will determine the shape of the arrangements”.
	I am aware that the Minister is going to bring forward an amendment on that so we will have that opportunity, but it is always worth putting on the record the views of the excellent Delegated Powers Committee on these matters, and obviously we welcome the Government’s response to it.
	We have another amendment in this group, along with the delegated powers amendment, which again turns—I will not labour this point—on the issue of “may” and “must”. The first part of Clause 21, which is entitled, “Policy for dealing with a deficit or surplus”, says:
	“Regulations may require the trustees or managers of a pension scheme … to have a policy for dealing with a deficit or surplus in respect of any collective benefits that may be provided by the scheme, and … to follow that policy if a valuation report shows a deficit or surplus”.
	In our view, it is extremely important that they have a policy around deficit or surplus; it is inconceivable, as my noble friend Lady Drake pointed out in the previous comparable amendment, that there would not be such a policy.
	I ask again, similarly to the previous set of amendments, whether the Minister sees any circumstances in which there would not be a policy for trustees in applying and dealing with deficits or surpluses. In order to ensure that the members have confidence in the policies, it is crucial that they are consulted on those policies, so there must be a policy that is available for them to have that assurance. For the members of the scheme there must be a policy, so the regulations should be saying that the trustees must produce a policy around deficit and surpluses within the scheme, which are crucial to the members within the scheme. I feel sure that the Minister will be able to give us the necessary assurances on that, which is why I shall be brief and beg to move.

Lord Bourne of Aberystwyth: My Lords, I am grateful to the noble Lord. I apologise that I keep referring to noble Lords opposite as “Ministers”; I am afraid that it is my background in the Welsh Assembly, where I am used to asking questions rather than answering them. They should not jump the gun.
	I reassure the Committee about the recommendations of the Delegated Powers and Regulatory Reform Committee. I confirm again that we are content with its recommendation and will therefore bring forward amendments on Report to reflect that. As the noble Lord has said, the power in Clause 21 allows us to ensure that schemes have appropriately transparent policies for how they will handle a situation where the scheme is outside the probability range for paying the target benefits, and that it is a permissive power, not a mandatory obligation.
	I shall share some of our thinking around how and why we will use the powers in Clause 21, which deals with what happens in schemes with collective benefits when the required probability range in relation to the target benefits is not being met. In our drafting approach we have used the term “deficit or surplus” to refer to the situation where the scheme is above or below the required probability range. However, I remind the Committee that there is no promise in relation to a collective benefit that an employer would need to stand behind.
	The first question to ask is why we require trustees or managers of schemes providing collective benefits to draft a policy on deficit and surplus in the first place. We believe that this is essential because schemes providing collective benefits function in an open and transparent way. It is vital to engender confidence in the way that these schemes are managed and are seen to be managed. Indeed, the lack of a policy set out in advance about how schemes would adjust members’ benefits if required has led to heated public debate in the Netherlands, where some schemes had to reduce benefits when members were not expecting that to happen. I hope that we have learnt lessons from experience elsewhere, as I indicated earlier; this is very much central to the Government’s approach.
	We would certainly not want that situation to happen here. So, to address any potential concerns or confusion about how over or underperformance against the probability range will be dealt with, we have introduced Clause 21. Using these powers we may require trustees or managers to schemes providing collective benefits to set out a policy in advance in which they explain clearly how they will deal with such situations and the different options they may take depending on the situation. Trustees or managers will be required to follow that policy where a valuation report under Clause 19 shows there is a deficit or surplus in meeting the target. The aim here is to ensure that by following this policy the scheme is able to return to a position where the probability of being able to pay target benefits falls within the required probability range. This policy will set out a clear set of options or actions that will reassure members that the scheme will be brought back on course and will inform them about how this will occur.
	Trustees or managers will have flexibility to draft the policy to fit within their own scheme design. It is not our intention to place unnecessary restrictions on trustees or managers as we recognise schemes that provide collective benefits will be different from one another. However, we want to make sure that they have appropriate mechanisms in place to ensure good governance.
	I am sure that we all recognise the importance of that and I do not think there is a great difference of approach between the Front Benches. Perhaps there is a difference in approach, but certainly not in terms of desired outcome. I am sure that noble Lords will understand the need for some flexibility within policy design. It is equally important to have parameters in place—I accept that entirely. We have taken power to set out matters that the trustees or managers must take into account or principles they must follow when formulating the policy. For example, it might be appropriate to put some principles in place about the extent to which any intergenerational transfers can take place. I know that that is an issue that Members are rightly concerned about. We will consult on how these powers may be used.
	The core of the difference is that the powers in Part 2 are intentionally permissive, not prescriptive. We want to regulate only where necessary and appropriate.
	Turning to the noble Lords’ amendments, therefore, we believe that the right approach is the permissive one. As I mentioned, further work and conversations are required with the Financial Conduct Authority to establish how it will regulate for non-trust based schemes, because we want to go forward in a parallel way to make sure that both sets of schemes—contractual and trust—are taken forward in a similar fashion. Amendment 11, if accepted, would oblige us to make regulations for personal pension schemes where we may not actually need to do so, with the unwelcome prospect of double regulation. As for Amendment 12, this is another case of the DPRRC recommending that the power should be subject to the affirmative procedure. As I set out right at the start of my response to the amendment, we are content with accepting that recommendation.

Lord Bradley: I am slightly confused. The Minister seems to be saying that there would never be a circumstance where there would not be a policy and therefore it can be permissive because there would be no exception to it. There would always be a policy in place. Can he confirm that that is the case?

Lord Bourne of Aberystwyth: I am happy to confirm that. I believe that I indicated in response to an earlier amendment that there would not be any of these powers where we would not anticipate regulation. We do not see a vacuum in any sense in any of these matters. As I said, I think that the difference is a difference of approach rather than a difference of outcome. We believe that we will reach the goal—achieve it—on a permissive basis. We do not believe that the mandatory approach, which I believe is what the noble Lord is pursuing in relation to at least some of these amendments, is the correct one. The difference is a difference of approach rather than a difference of outcome. I hope that that deals with the point that the noble Lord was making. On that basis, I respectfully ask the noble Lord to withdraw the amendment.

Lord Bradley: Again, I am grateful to the Minister for his response and clarification. From this side of the Committee we could not envisage a situation where something as important as deficit and surplus within funds and providing policies about which the members are clear and on which they have been consulted would not be addressed and in place. The Minister assures the Committee that, through a permissive regime, there will always be such a policy in place. With that assurance, I beg leave to withdraw the amendment.
	Amendment 11 withdrawn.
	Amendment 12 not moved.
	Clauses 21 to 24 agreed.
	Clause 25: Policy for calculating cash equivalent of benefits
	Amendment 13
	 Moved by Lord McAvoy
	13: Clause 25, page 10, line 35, at end insert—
	“( ) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

Lord McAvoy: My Lords, Clause 25 gives the Secretary of State the power to require the trustees or managers of a pension scheme to have a policy concerning the cash equivalent of a pension within a collective scheme. It also requires the trustees or managers to consult on the matters and principles they need to follow when calculating and verifying the cash equivalent of a pension in a CDC scheme. This amendment would require the regulations issued under this section to be subject to the affirmative procedure. This clause was also a part of a very large group of amendments which the Government introduced at Report in the other place.
	There remains a tension at the heart of this Bill. The Government have been forced—I do not think there is anything wrong in that—into making so many amendments in large part because of the introduction of freedoms and flexibility in the Budget of 2014. We support those freedoms as long as they can be introduced without harming middle and low earners and do not end up leaving people reliant on the state. But really, more should have been done to work out the effect that these policies would have on how the others would operate. As we have already shown, a large part of the benefit from a CDC scheme can lie in the intergenerational risk sharing that it makes possible. This is how the schemes operate elsewhere. However, if a large proportion of people opt out at 55 by choosing to get a product that enables them to access their money straight away, then that risk-sharing element ceases to be there to the same degree.
	This raises the possibility of having knock-on effects on the probabilities of achieving certain targets within the scheme. My concern here is that further work needs to be done on the interaction between the changes in the Taxation of Pensions Bill—which being a money Bill has passed through its remaining stages here—and the changes in this Bill to enable collective schemes and risk sharing. A good start would be to require the affirmative procedure to be used for the regulations on cash equivalents. I therefore ask the Minister to respond to that point in as much detail as possible so that we can grasp the thinking behind the Government’s proposals. I beg to move.

Lord Bourne of Aberystwyth: My Lords, I thank the noble Lord for moving this amendment. Clause 25 contains a power to require in regulations that trustees or managers of schemes providing collective benefits must have, and follow, a policy for calculating and verifying the cash equivalents of a member’s collective benefits. Cash equivalents may be needed when a member transfers to another scheme or for the purpose of sharing a pension on divorce, for example. Clause 25 allows for regulations to be made requiring the trustees or managers of a scheme offering collective benefits to set up and follow a policy for the calculation and verification of cash equivalents for collective benefits. The regulations can, among other things, require the trustees or managers to consult about the policy, require that the policy is consistent with regulations about calculating transfer values and other relevant legislation,
	make provision about the content of the policy, set out matters that have to be taken into account when putting the policy together, and make provision about reviewing and revising the policy.
	Delegating to secondary legislation will allow the department to consult on the views of the pension industry, in the wider sense of involving pension groups as well, to ensure that the provisions set out in regulations will capture potential future varieties of collective benefits. The regulations will need to include a fair amount of technical detail, and some of the requirements will be largely procedural in nature. We therefore consider that the negative resolution procedure is the most appropriate form of parliamentary scrutiny here. In the process of parliamentary scrutiny there needs to be a balance between legislative scrutiny and the need to produce secondary legislation in a responsive and speedy way when needed. The requirement for the affirmative procedure in every case as required by this amendment would make it harder to deliver and maintain the regulations that the industry and members need, and would not in our view be an appropriate use of parliamentary time.
	It is significant that the 12th report of the Delegated Powers and Regulatory Reform Committee, which considered the Bill, did not make recommendations as regards Clause 25. I am not convinced that the arguments made elsewhere by the Delegated Powers and Regulatory Reform Committee—which we have largely, although admittedly not totally, accepted—apply in the same way here. The committee was rightly concerned about regulations that have shaped collective benefits. Regulations about policies on calculating cash equivalents are not about shaping collective benefits but about how to put a cash equivalent value on a collective benefit when a member asks for a transfer or, as I said, on such an issue as divorce. Those are important matters, but they are largely technical and procedural, and we believe that they are more appropriate for the negative procedure. On that basis, I hope I have dealt with the issues raised by the noble Lord, and I respectfully ask him to withdraw his amendment.

Lord McAvoy: My Lords, once again I thank the Minister for a very full exposition of what was envisaged in the Government’s approach to that. We have at least raised a cautionary note, which the Minister has responded to, and there is not much point in pursuing it further. I beg leave to withdraw the amendment.
	Amendment 13 withdrawn.
	Clause 25 agreed.
	Clause 26 agreed.
	Clause 27: Requirement to wind up scheme in specified circumstances
	Amendment 14
	 Moved by Lord Bourne of Aberystwyth
	14: Clause 27, page 11, line 20, leave out first “or”

Lord Bourne of Aberystwyth: My Lords, the package of amendments in this group falls neatly—I hope—into the category of minor and technical. Inevitably we
	discover bits of drafting that can be improved or things that need to be clarified, and these amendments do just that. They cover a number of specific issues that relate to clauses in Parts 1 and 2, and with noble Lords’ permission I will explain a little more about what each of them does.
	The first group of amendments is about consistent drafting. Clause 27 makes provision for regulations to require a scheme or part of a scheme providing collective benefits to wind up. Separately, Clause 37 makes provision for regulations to impose duties on managers of non-trust-based schemes to act in the best interests of the members when taking certain decisions. Both provisions make reference to different types of requirement that may apply in relation to the scheme, including scheme rules, and any relevant legislation that applies to the scheme. The amendments do nothing more than ensure that the same things are described in the same way in both clauses.
	Moving on, the amendment to Clause 32 puts beyond doubt that any requirement to publish documents may also apply to policies required by regulations under Part 2 of the Bill. Regulations made under powers in Part 2 can require trustees or managers of schemes that provide collective benefits to have policies regarding a number of matters, including the factors used to calculate members’ benefits, the calculation of transfer values and the steps that may be taken to deal with a deficit or surplus.
	Clause 32 makes provision for regulations in Part 2 which require trustees or managers to prepare or obtain any document, to include requirements about publication of those documents and about sending copies to a specified person. It was always the intention that any requirement imposed by regulations under Clause 32 could apply to policies about the operation of collective benefits, and these amendments put that beyond doubt.
	The amendment to Clause 45 is about making the drafting clearer. The changes to Section 67A of the Pensions Act 1995 made by Clause 45 make any modification to an occupational pensions scheme that would replace a member’s accrued rights with a right to a collective benefit a protected modification, which can be made only if the member consents. This amendment makes clear that this provision applies only where the existing accrued right is not a right to a collective benefit.
	I turn to a few minor amendments to Schedule 2, which amends existing legislation as a result of the changes in Parts 1 and 2. Paragraph 47 makes changes to Section 30 of the Pensions Act 2008. Section 30 deals with automatic enrolment and the transitional period that employers have to meet their automatic enrolment duties for defined benefits and hybrid schemes. The changes in paragraph 47 reflect the changes to scheme categories in Part 1 and replace references to “hybrid schemes” with “shared risk schemes”.
	Amendment 49 simply replaces a stray reference to hybrid schemes that was missed when the Bill was introduced. Amendments to paragraph 50 of Schedule 2
	remove an ambiguity in the drafting. Paragraph 50 makes changes to Section 99 of the Pensions Act 2008. Section 99 lists definitions used for the purposes of that Act. There are currently two separate provisions in paragraph 50 of Schedule 2 which relate to the definition of “defined benefit scheme”. One adds a new definition drawn from Part 1; the other is intended to remove the existing definition. The existing drafting is ambiguous and needs to be corrected. These amendments remove the ambiguity by replacing the two provisions with a single provision that simply substitutes the old definition with the new one. As collective benefits are now mentioned in the Pensions Act 2008, the definition needs to be added to Section 99, so Amendment 51 also adds a definition of collective benefit to that section.
	I hope that noble Lords will agree that this package of amendments represents a necessary improvement to the clarity and accuracy of the Bill, and on that basis I beg to move.

Lord Bradley: I am grateful to the Minister again for his explanation of the government amendments, which I accept are minor and technical. However, they clarify the position on certain aspects of the Bill, which is welcome, and remove any ambiguity that may have transpired from the original drafting. In that light, the Opposition are happy to accept them.

Lord Bourne of Aberystwyth: I am most grateful to the noble Lord, and I commend the amendments to the House.
	Amendment 14 agreed.
	Amendments 15 and 16
	 Moved by Lord Bourne of Aberystwyth
	15: Clause 27, page 11, line 20, leave out “any scheme rule” and insert “provision of a scheme”
	16: Clause 27, page 11, line 23, leave out “scheme rule” and insert “provision of a scheme”
	Amendments 15 and 16 agreed.
	Clause 27, as amended, agreed.
	Clauses 28 to 31 agreed.
	Clause 32: Publication etc of documents
	Amendments 17 and 18
	 Moved by Lord Bourne of Aberystwyth
	17: Clause 32, page 12, line 35, after “document” insert “or have a policy”
	18: Clause 32, page 12, line 36, after “document” insert “or policy”
	Amendments 17 and 18 agreed.
	Clause 32, as amended, agreed.
	Clauses 33 to 35 agreed.
	Amendment 19
	 Moved by Lord Bradley
	19: After Clause 35, insert the following new Clause—
	“Collective benefits: annual review
	The Secretary of State must each year produce a report on the operation of this Part and the report must include the number of collective benefit schemes that have been set up under its provisions.”

Lord Bradley: My Lords, I draw attention to the wording of this amendment because I am sure that it will be welcomed by the Government and that they will wish to produce and deliver such an annual review to Parliament.
	When the press release that accompanied the Bill was issued, it gave me the impression that the Government envisaged that Part 2 would lead to a number of new combined collective defined benefit schemes coming into operation. However, as we have seen the Bill being considered in this House and in the other place, the number of schemes coming into operation has been cooling and the Government have been more reticent to be clear about how many new schemes they anticipate will be set up.
	This is why, among other things, the number of schemes should be included in an annual review to see whether provisions in the Bill adequately enable collective defined contribution schemes to be set up. That cannot and should not be the only measure. We do not wish such an annual report to cover only quality, but it would be useful for Parliament and the public more broadly to be kept aware of how the policy is unfolding.
	There is also the wider point that a number of issues that have been raised in Committee today have centred on the speed with which the Bill is passing through both Houses of Parliament, the number of changes to the Bill in that process and the ability to scrutinise secondary legislation alongside primary legislation. All this leads to the conclusion that an annual report to Parliament would be a very effective way of giving assurances that all is well with the implementation of the Bill and indicating specifically the consequences around CDCs.
	I accept that the first annual review—if, or when, this amendment is accepted—might be rather thin because, as we heard earlier, the regulations for Part 2 will not come into force until later in the year. However, I do not think that undermines the basic point that legislation of this type should be reviewed and presented to Parliament on an annual basis. I believe that the Government will welcome the publication of such a report, principally because these new schemes are part of the overall package of changes which have been hailed by Ministers as a pensions revolution. It will enable the Government to communicate to Parliament, and more importantly to the public, how these packages of reforms are rolling out, how they are working in practice and how they are achieving the policy objectives which the Government have laid out, not only with the Pension Schemes Bill but with the Taxation of Pensions Act and the other pensions provisions that have been put through Parliament. I accept that this amendment
	only applies to collective schemes, but it establishes a principle about reporting to Parliament on the pensions changes more broadly. It is a peg on which to hang a package of reporting and a way in which we can continue to have the ability to question and scrutinise a very important area of policy for millions of people in this country. I beg to move.

Lord Bourne of Aberystwyth: My Lords, I thank the noble Lord, Lord Bradley, for moving this amendment. I will say a little about our approach. As I think noble Lords are aware, our approach is about enabling choice. While the number of schemes is important, it is not the only measure of success.
	The Bill enables schemes providing collective benefits to be set up where employers and providers wish to do so. We believe that this Bill will stimulate greater innovation and choice, allowing employers to adopt the sort of arrangements available in other countries—we have spoken previously of the Netherlands, Denmark and Canada—if it is right for them and for their employees. The number of schemes is an important issue, but it is certainly not the only issue.
	We believe that the development of schemes offering collective benefits could be more appropriately monitored in other ways than a bespoke annual review, which may become something of a tick-box approach. We envisage that this could be done through existing access through the Office for National Statistics, which conducts surveys and collects data, for example.
	Perhaps more importantly and across the piece, the noble Lord indicated that this review is on only one small aspect of the legislation. There is much else in the legislation. The Cabinet Office Guide to Making Legislation already requires the relevant government department within three to five years after Royal Assent to submit to the relevant Commons departmental Select Committee a memorandum, to be published as a Command Paper, containing a preliminary assessment of how an Act is working in practice. No doubt, our House can pick up on that too.
	I recognise that there is a genuine concern about providing information on how this aspect of the legislation is operating in practice and perhaps more widely than the noble Lord indicated in his contribution. There is a wider issue about how the rest of the legislation is operating. I will have a look at this to see what we can do. However, we believe that an annual review is somewhat bespoke and tick-box. We have a provision for a review within three to five years of the Bill passing, but if there is anything that we can do supplementary to that, and should be doing, I will come back on that on Report. I say that without any firm promise that we believe there is anything to do, but I am happy to look at it. On that basis, I hope that the noble Lord will withdraw the amendment.

Lord Bradley: I welcome the Minister’s response to the request for an annual review. It was certainly not my intention—I hope it was clear in my opening remarks—to see this as a tick-box exercise. I see it as a very effective document that would be presented to Parliament and allow us to have proper scrutiny of a very important new proposal that has been brought
	forward. The Minister is right that it was in the context of looking at the wider pension reforms that are going through.
	While I do not believe that we need to wait three or five years to get such an annual report, I accept the Minister’s offer to at least consider how information can be provided to the House, specifically on collective defined contribution schemes, and then more widely in the context of pension reform. I welcome the Minister’s response to that at a later stage in our deliberations. With that assurance, I beg leave to withdraw the amendment.
	Amendment 19 withdrawn.
	Clause 36 agreed.
	Clause 37: Duty to act in the best interests of members
	Amendment 20 not moved.
	Amendment 21
	 Moved by Lord Bourne of Aberystwyth
	21: Clause 37, page 14, line 40, leave out “instrument, enactment or rule of law” and insert “legislative provision, rule of law or provision of a scheme or other instrument”
	Amendment 21 agreed.
	Clause 37, as amended, agreed.
	Clause 38 agreed.
	House resumed. Committee to begin again not before 8.29 pm.

Counter-Terrorism and Security Bill
	 — 
	First Reading

The Bill was brought from the Commons, read a first time and ordered to be printed.

NHS: Medical Competence and Skill
	 — 
	Question for Short Debate

Lord Parekh: To ask Her Majesty’s Government what steps they are taking to maintain and, where necessary, improve the level of medical competence and skill in the National Health Service.

Lord Parekh: My Lords, it is an honour and a privilege to introduce this debate. I thank in advance all those Peers who will speak in the debate for the significant contributions that they will make from their respective points of view.
	The NHS is one of our finest achievements. No pain goes unrelieved for lack of money. Its staff are dedicated, driven by a sense of calling, and their level of competence is second to none in the world. However, no institution is perfect and it can always do with change. Every institution builds up its own structural biases, and every profession has a tendency to build up a certain ethos, corporate mentality and collective spirit, and tends to do things in a certain way that is useful but has limitations. I suggest that this is just as true of the NHS. That is why several changes have been made over the years, particularly during the last 25 years. I do not care for the changes that are largely managerial and which are concerned to centralise the system and transfer power from doctors to managers. But I greatly welcome the changes that are of a medical nature; for example, appraisal and revalidation of GPs, and the collection and publication of surgeons’ death figures. These changes have been or will be of great benefit to the patients and to the medical profession. It is in the spirit of these changes that I wish to frame this debate and ask two questions.
	My first question has to do with the general nature of medical competence in the NHS. How can we sustain the current level of medical competence and skill in the NHS? There is a general feeling that it is being threatened by recent structural and managerial changes. We need to address that concern. Secondly, there is a general impression among the public, the professional staff and the managers that errors of judgment occur in the NHS, and that there are pockets of incompetence that need to be carefully identified and addressed. We obviously need to see whether there is any truth in this impression and deal with it. Sometimes it is denied altogether: that there is absolutely nothing wrong with the level of medical competence in the NHS. That is not true. A report by the Parliamentary and Health Service Ombudsman on 26 November 2014 says that,
	“poor communication, errors in diagnosis … and poor treatment”,
	top the list of hospital complaints investigated by the ombudsman, Julie Mellor. She upheld just under half of those complaints. Statistical surveys in Australia, the United States, Canada and elsewhere have highlighted what is sometimes called substandard surgical performance. These things occur in those countries and I see no reason to believe that, much as we are better than many of those countries, some of these things do not occur here from time to time.
	I was recently reading a wonderful article by the Honourable Geoffrey Davies of the Australasian College of Surgeons in the recent issue of the ANZ Journal of Surgery, in which he talks of an unacceptable level of errors resulting from inadequate competence. In our country, more than 12 surgical specialties collect and publish data on surgeons’ death rates. They show variations and some cause for concern. In all these cases, the concentration is unfortunately on the surgeons. Their errors are easy to identify and difficult to forgive. I suggest that we also look at non-surgical consultants, including physicians and GPs—indeed, the entire medical profession—to ensure that they are of the highest level of competence, for which we are justly famous and for which the medical profession has justly deserved a high reputation.
	Medical competence is not about negligence—we know how to take care of that—and nor is it about professional conduct or misconduct. It is about medical judgment: that is, correct diagnosis and correct treatment. It depends not just on the kind of medical degree that one has acquired, but on one’s experience and training, on keeping abreast of one’s subject, on giving enough time and attention to the patient, on a sense of accountability for the consequences of one’s diagnosis and treatment, on constant feedback from the patient and so on. Given that these are some of the preconditions of medical competence and the wider feeling that I talked about earlier, I suggest that our distinguished medical professional might like to consider five suggestions. I make them in a tentative spirit, not being a doctor myself.
	First, as I said, our surgeons have introduced the practice of collecting and publishing death figures. I suggest that, with suitable modification, the same sort of practice needs to be introduced for consultant physicians. They currently have no means of knowing how the patient responded to the treatment that they prescribed. They are in no position to learn from positive and negative experiences. For example, if a patient goes to see a consultant, a particular medicine is prescribed and if it does not work, the consultant will not know this. The GP picks up the pieces. If the GP decides to refer the patient to the consultant, the consultant may not be the same one that the patient saw in the first instance. It is therefore very important that there should be a measure of continuity between the consultant and the patient. This could be ensured either by the GP informing the consultant as to what his prescribed medicine has done to the patient, or, as happens in some countries, through the patient being in contact with the consultant on a regular basis, or when the medication does not work as he was promised it would.
	Secondly, consultants and GPs are subjected to sometimes unreasonable targets; hence, they are unable to spend as much time with patients as they would like, or as is necessary. This leads to errors of judgment, some of which are very serious. Steps need to be taken to avoid such situations. Targets are important, but should not be unrealistic or at the cost of the quality of care.
	Thirdly, GPs are at the centre of the NHS. It is not a secret that patients sometimes avoid certain partners in a practice, even when that involves considerable waiting. There are many reasons for this. One has to do with suspicion of a lack of full clinical competence on the part of certain partners in the practice. It is in the interest of the GPs and the patients that the appraisal system that we have introduced should be made robust. Inadequate GPs should not be covered by an otherwise excellent practice.
	The criteria of patient satisfaction should be more carefully defined and include not just “how much time did the doctor give you” or whatever, but such questions as how many visits she had to undertake before her complaint was diagnosed, or how often her medicine was changed before she felt better. Cases of whistleblowing among GPs and consultants should be viewed more charitably than at present. Whistleblowing is a public service and sometimes a compulsion of one’s conscience.
	Hence, its occasional excesses or misuse should be condoned or dealt with lightly. If even 1% of our more than 60,000 GPs systematically made a mistake, the extent of harm done to patients is quite considerable. That is also true of consultants. In so far as whistle- blowing diminishes this danger, there is every reason to welcome it.
	Fourthly, some cases of incompetence have been identified in relation to doctors who have been engaged by medical companies, on whose resources the hospitals rely. These medical companies need to be monitored and watched more closely.
	Fifthly, young doctors sometimes do not have enough clinical experience because of the EU working time directive. The directive is necessary because it protects patients against tired and overstretched doctors. It also allows doctors to learn their craft under ideal conditions. However, training is also important and we therefore need to increase the training period for GPs.
	To sum up, I salute the professionalism, idealism and dedication of the medical profession in the NHS. In this debate, I have been concerned to ensure that nothing is done to tarnish the richly deserved reputation of the medical profession, whether it is done by overbearing managers, by target-obsessed civil servants, or by a complacent and sometimes defensive profession.

Viscount Bridgeman: My Lords, I thank the noble Lord, Lord Parekh, for securing this debate. I will venture to speak on a subject which has some relevance to its title and to the noble Lord’s speech—that is, the problem of English language testing for health professionals from the EEA working in the United Kingdom. I speak with particular reference to nurses, of which I have some familiarity, but my remarks should apply also to dentists and pharmacists. I know that other branches of healthcare are in the pipeline for similar consideration.
	I am sure your Lordships’ experience of nurses in the NHS from the EEA is overwhelmingly one of courtesy, competence and compassion. Nevertheless, I am sure you will also have had instances of language difficulties over health workers’ command of English. The background to this problem is the mutual recognition of professional qualifications directive of 2005, which covers the mutual recognition of professional qualifications within the EEA. As originally promulgated, this contained the requirement that registration in the respective countries should be done before any testing for English language capability, the argument being that imposing language tests before regulation inhibited one of the EU’s basic concepts, the free movement of professionals within the Community.
	This gives no problems with professions such as surveyors, architects or engineers. However, healthcare is in a category of its own because there is the additional consideration of patient safety, and this has caused considerable problems for the regulating bodies. For instance, the Nursing and Midwifery Council has been obliged first to register candidates without being able to assess their English language proficiency. Control over its members tends to be lost, or at best diminished. A fully registered nurse, probably in employment, is
	not going to take lightly to being told to go back to school to improve his or her English. Indeed, the onus for language competency currently rests with employers, a far from satisfactory position. This has been the potential scenario for disasters waiting to happen. We are fortunate that there have been no serious ones. However, as a journalist has pointed out, the difference between a milligram and a microgram can be a coffin.
	Over the past few years the Department of Health and its associates in the three devolved Administrations have been involved with the Commission in addressing this problem. Fortunately, a lead was given by the GMC, which last year achieved a very satisfactory outcome in respect of doctors. If we turn to the other branches of healthcare, in November 2014 the department and its counterparts in the devolved Administrations issued a four-country-wide paper for consultation, the outcome of which has been a draft Order in Council which, I understand, will be due for debate in both Houses in the course of this Parliament. The effect of this should be that the regulating bodies will have the powers to delay registration of a candidate from the EEA if they are not satisfied with his or her language competence. This development should rectify a serious defect in the freedom of movement legislation, and I congratulate my honourable friend Dr Dan Poulter and his colleagues in his department and the other devolved Administrations on their diligence in achieving this potentially favourable outcome.
	This may appear to outsiders to be a minor procedural adjustment. I suggest, however, that it is in fact of great significance. Not only should it be a step towards reducing accidents caused by poor language communication but, of no less importance, it will enhance the standing and credibility of the respective regulators—the Nursing and Midwifery Council, the General Dental Council, the General Pharmaceutical Council and the Pharmaceutical Society of Northern Ireland—in giving them greater control over their members in ensuring that those from the EEA go into the employment market with the necessary competence in English.

The Countess of Mar: My Lords, I, too, am grateful to the noble Lord, Lord Parekh, for introducing this Question for Short Debate this evening.
	I encounter almost daily cases where people with ME/CFS and others with medically unexplained physical symptoms, known as MUPS, are treated abominably by members of supposedly caring professions. For example—and it is by no means an isolated example—a young man of 17 had problems with tolerating foods since he was a small baby. Standard tests could provide no clear reason. By the time he was 16 he was diagnosed by consultant paediatricians at both St Thomas’ and Great Ormond Street hospitals as being extremely reactive to almost all foods and was restricted to a prescribed liquid diet, as none of the consultants had any other resolution. Eventually he was admitted to an environmental medicine polyclinic, where I am also treated, where he has been treated with low-dose immunotherapy and nutritional supplementation. Over
	a period of a few months, from being able to tolerate no foods he is now eating 33 different foods with few problems.
	On his 17th birthday, he went out with some friends for a meal and during that night he developed very severe abdominal pain and, after his GP had refused to visit, his mother managed to get him to the polyclinic. There acute appendicitis was diagnosed and immediate admission to his local hospital in Oxford was recommended. The paediatric consultant’s first response was to ask, “What has the mother of this boy done now?”. On arrival at the hospital the consultant informed the mother that he knew that nothing was wrong with the boy but he would keep him for observation. He scheduled a scan and then went home for the weekend. The boy was left screaming and in acute pain for a further 24 hours, without pain relief or other medication. By the time he was operated on, his appendix had perforated, making treatment much more complex than necessary.
	To this day, despite all the evidence of the extremity of his reactions to foods and the failure of our two flagship hospitals to treat this young man’s condition, his Oxford consultant insists that there is nothing wrong with him, that he should stop the polyclinic treatment and that he should eat a normal diet, apparently because standard allergy tests do not provide confirmation. This results in great stress and distress to the boy and his mother.
	In fact, substantive evidence in numerous publications proves that the safety and efficacy of immunological changes after treatment with oral immunotherapy for cow’s milk allergy, nut allergy, allergic rhinitis, wheat desensitisation and other specific foods and chemicals is well recognised. The treatments are validated and are neither experimental nor complementary medicine.
	I have long wondered why there should be such particularly unreasonable treatment for people with MUPS and I have come to several conclusions. Medicine is supposed to be a very rewarding profession, whether the practitioner is a doctor, nurse or ancillary worker. The patient consults, the doctor diagnoses and prescribes and the patient gets better or at least no worse. On the occasions when the patient’s condition deteriorates and he or she dies, it is usually because the illness is well understood and this is part of a normal process. This is clearly not the case with MUPS. Modern doctors are highly reliant on technology. Test reports taken at face value can dominate the diagnostic process without taking into account factors such as clinical presentation and history and the possibility of false positive or negative results. Additionally, medical practice has become a cost-benefit calculation, with treatments either enforced or rejected on this basis rather than on patient need. I have the distinct impression that, because some doctors and other medical practitioners fail to understand some disease processes, they grow impatient, even intolerant, when their patient fails to respond and then they blame the patient.
	The skills that medical practitioners acquire during training are essential to good practice for the rest of their working lives. Unfortunately, the natural scientific curiosity of the profession seems to be stifled in the course of their training. There are still far too many
	medical professionals who hold that MUPS are “all in the mind” and that patients simply need to pull themselves together, perhaps with the help of a little cognitive behavioural therapy. Somehow, current research findings are not filtering down to doctors who deal with patients.
	Are the time constraints on appointments and the dependence on technology reducing a doctor’s ability to listen and to communicate effectively? Is it because GPs and consultants work such long hours that they have neither the time nor the energy to do their own research on problems concerning chronically ill patients? Is it because complex investigations cost money and initial investigations come back as being within normal ranges that the current view is that further tests would not be cost effective? Or is it because doctors have become so demoralised that they can see no reason to go the extra mile on behalf of their patients?
	The NHS is excellent for acute management of illness because clear guidelines are usually followed assiduously by all staff. Chronic complex conditions are problematic because clinicians seem to deal with only one symptom at a time. Specialisation means that patients with ME/CFS are rarely looked at holistically. I have heard of one doctor’s surgery with a notice on the door which reads, “One complaint at a time”. The trouble is that frequently it is the combination of symptoms which will point to a clear diagnosis.
	I have confined my speech to one aspect of competence and skill, one which falls far short of the excellence that should be the norm. I am interested to hear how the Minister proposes to improve the position for some 250,000 patients with ME/CFS and the many more who have other medically unexplained symptoms.

Lord Selsdon: My Lords, I am most grateful to the noble Lord, Lord Parekh, for giving me an opportunity to say things that I never thought I would say. In my family, we have had many doctors but we did not do being ill. We were brought up to believe that you suffered and you lived. However, one day, we had an incident at home when I learnt about NHS 111. I dialled 111 and, in no time at all, a member of the family was advised. I went off to my first experience of A&E, which lasted for only four and half hours, and I learnt quite a lot.
	Another day, to my horror, I was standing here speaking when I suddenly felt rather faint. When I went out, I nearly passed out, and when I got to my office in Millbank, the word was out and a paramedic was there. He found that he was not competent to look after me properly and, before I knew it, an ambulance arrived and then another. I was tested and overwhelmed with the overcompetence of the issue.
	After that I thought that perhaps I had better register with the NHS, which was rather a pleasant exercise. The local operation was rather busy, but it thought that it might be able to fit me in because my wife was there. Since then, I have been extraordinarily impressed. You ring up and ask for an appointment. Usually you can get one within a day or, if it is urgent, more quickly. You walk there and wait for 10 minutes. You are seen for 10 minutes, and a diagnosis takes
	place. The e-mails go off and you are told which clinic or wherever you should go for the next stage. Then you walk down the road down the road to the pharmacy to get your prescription, with the dog in tow.
	I had not realised the significance of pharmacists who are, in a way, linked to the NHS. I interviewed a few and found to my surprise that there are 12,000 pharmacies in the United Kingdom and that a trained pharmacist spends more time in training than a doctor. Then you realise that there is a link: almost every time you consult a doctor, you end up with a prescription that you take to a pharmacist. I have spoken to several pharmacists and to their association and have realised that there could be a much closer link between them and the medical profession.
	My interest in this sector is that when I was in the financial world, I dealt with some of the newer technologies, which I have mentioned on other occasions, not least the developments in the stem cell field. I did some research into the burdens of disease in Europe. To my surprise, cardio came top at 21%, followed by mental at 20%. Down the line was cancer at only 11%. Looking at the afflictions, as one would call them, you find that heart and cancer were almost equal. One of the biggest afflictions was Alzheimer’s, which I would not know how to treat.
	I thought about what can be done in the high-tech or the technological field to use the latest technology. At that time, I got involved with the Germans in working with adult stem cells. We looked at the areas of operation. I did not realise that bits of out of people’s hips were taken out and were injected here and there. There were problems of morality. In Germany, I spoke to Professor Strauer who had developed some of these technologies and found that there were some religious factors against it. A meeting was held, surprisingly, with the Pope who approved that this sort of invasive surgery was reasonable.
	I am talking about myself, a complete amateur. Amateur means someone who loves his subject but probably knows nothing about it. When I introduced people for stem cell treatment, I found that it was very simple: you take something out of one part of the body and inject it into another. Before you know it, you may have cured the problem of diabetic foot. I had a great friend whose wife was suffering very badly and asked him why he did not look at the application of adult stem cell treatment, which he did. I did not see him for a while, but when I did he said that his wife was much better. Then you get one of those moving moments in life: his wife lived for another four years. I was invited to the funeral at a church in France, at which my friend thanked me for giving them a further few years together.
	When you look at some of the new technologies in health, you have to say that some are to help to cure people and some are to help to keep people alive. Health is part of the social scene. It is the interrelationship between the professions, the nurses and others. The Minister has spoken today about A&E centres. I am a leading expert on them as I have spent many hours in them waiting to collect people, looking at the nationalities of people and wondering why you need four ambulances stationed outside. The A&E situation has come to
	dominate the British health situation overall. Can the Minister give us an idea of how many A&E patients are now being served? What are their nationalities and what are the costs? I accept that my experience with a local health operation has been very thorough. I have a code name that I can ring. I am told that I must receive an e-mail every five minutes. I am very impressed indeed, and I thank the Minister for what he has done.

Lord Turnberg: My Lords, I, too, thank the noble Lord, Lord Parekh, for introducing this debate in his usual erudite manner. Many years ago I had the privilege of being president of the Medical Protection Society, a mutual assurance society that provides indemnity for doctors accused of negligence and misbehaviour. It provides recompense for patients who were harmed by their negligent practice. It was there that I was brought face to face with the poor behaviour of too many doctors. I was surprised and discomforted by that because until then I had done my level best to instil high standards of practice in my students, when I was dean of a medical school, and in my trainees, when I was a consultant and president of the Royal College of Physicians. To say the least, I was somewhat disappointed when I came to the Medical Protection Society.
	However, I soon realised that in a busy day-to-day practice, doctors are only human. They can make occasional honest mistakes or errors of judgment. I do not for a moment excuse any of that but I thanked my lucky stars that there but for the grace of God went I. Among the millions of patients seen every day, there are bound to be occasional mistakes. Those are much more likely where doctors are rushed and under the sometimes intolerable pressure that is too common now. Much more worrying were the fortunately less common doctors whose behaviour and practice were poor, who were unfeeling and lacking in empathy or who were just substandard. They clearly have to be weeded out by one means or another. They have to be retrained or prevented from practice, which is where the General Medical Council comes in.
	Something I noticed when I was training young doctors was that it was hard to distinguish between those who had qualified from different medical schools around the country. Their skills and practice seemed very similar, no matter where they had graduated. That made me realise that most of their skills and attitudes were being gained after they had qualified and that it was their postgraduate training that really mattered. Here, too, there are problems that might be relevant. Training has certainly suffered as a result of the EU working time directive and the imposition of rotas of care. Both have had an impact on continuity of care and have fragmented the learning experience of many. Some training programmes have been so structured and rigid that they have seen trainees rotate at bewildering speed from one experience to another, again interfering in that continuity of the relationship between trainee and trainer that is so important. These are not easy problems. We must, however, try to correct them. I would be interested to know whether the Minister has any ideas about how we might do this.
	Finally, I shall follow the noble Viscount, Lord Bridgeman, and say a few words about the EU directive under which doctors trained in other member states can come to practice in the UK without any assessment here of their competence and skills. It is only in the past couple of years that the GMC has been allowed under EU law to test the language skills of EU doctors. I fear that we are still not in a position to assess the training of a cardiologist, for example, from Greece, Spain, Holland or France or that of a neurosurgeon from German, Luxemburg or Belgium. They may be perfectly competent and capable, but the problem is that in the UK we have no information about what their training comprised and we are not allowed to make any assessment of it. That would interfere with EU manpower laws that encourage free movement of workers around the community.
	I tried to fill this gap several years ago when I was chairman of the Specialist Training Authority of the Medical Royal Colleges. Even though it would have been possible to do this then by a simple change in the directives that were available to us, as with many others of my efforts, I am afraid that I failed miserably. I would be very interested to hear from the Minister whether there is any hope that we may now be able to correct this anomaly.

Lord Bhatia: My Lords, I am grateful to the noble Lord, Lord Parekh, for raising this issue and giving us an opportunity to discuss it. The NHS is a burning and most important issue in the minds of citizens. It is one that will be foremost in the minds of everyone when voting in May this year. People will vote for the political party that assures them that the NHS is safe in its hands. I declare my interest in this issue as my daughter is a GP in London and her daughter is also training in the medical field.
	We all come with our different experiences—mine are positive—when we meet the NHS in the front line either with our GPs or when we end up in an NHS hospital and see the devoted, skilful and competent work of the professionals who provide humane and concerned care to cure you as soon as possible. Over the past few years, I have been a patient at a hospital. I have seen how I was diagnosed, treated and brought back to good health. The same applies to the GPs who take enormous care to treat you for your minor and major health issues. There is always enough time for you at the GP, who ultimately becomes a good friend, with care and concerns for your well-being. To me, at the age of 60, the annual flu jab is a great blessing.
	Very recently, I was admitted to hospital for a serious heart condition. Having been treated and discharged from the hospital, after a few days I received a letter from yet another NHS facility asking me to come to its rehab centre which would help me build up my muscles and teach me to walk, breathe and do exercises once a week. The professionalism of the staff at this rehab facility is, for want of a better word, exceptional.
	I therefore fully support the question asked by the noble Lord, Lord Parekh. The Government should not only maintain but improve the level of our NHS
	manpower. New scientific discoveries are coming on stream all the time. Medical professionals must be given the opportunity, time and resources constantly to update and improve their skills.
	In conclusion, I shall quote from the briefing pack from the House of Lords Library dated 7 January 2015. These are positive policy statements that should be followed. First:
	“No system can be 100% failsafe and where a failure does occur there needs to be a system-wide response with three key objectives: safeguarding patients; ensuring the continued provision of services to the population; and securing rapid improvements to the quality of care at the failing provider”.
	Secondly,
	“Healthcare professionals and clinical teams, their ethos, values and behaviours, will remain the first line of defence in safeguarding quality; the leadership within organisations who provide care remains ultimately responsible for the quality of care being delivered by their organisation, across all service lines”.
	Thirdly,
	“Getting the right staff with the right skills to care for our patients all the time is not something that can be mandated or secured nationally. Providers and commissioners, working together in partnership, listening to their staff and patients, are responsible and will make these expectations a reality. As national organisations we pledge to play our part in securing the staffing capacity and capability you need to care for your patients”.
	Finally,
	“Our National Health Service and public health services’ first priority must be the public that we serve. It is the commitment, professionalism and dedication of the NHS and public health staff that can make the greatest difference in providing high quality services and care for patients and their families”.

Lord Hunt of Kings Heath: My Lords, it is a great pleasure to speak in my noble friend’s debate, and I warmly welcome it.
	We would all pay tribute to the medical profession in the UK. We clearly have much of which to be proud. Equally, I agree with my noble friend that we should guard against the risk of complacency and always aim to sustain the current level of competence and try to enhance it.
	I shall put to the Minister five points about training, continuing professional development, the use of simulation techniques, the adoption of new practices and medicines and the issue concerning medical negligence raised by noble friend Lord Turnberg.
	I have been reading the Shape of Training report, led by Professor David Greenaway that looks at the future training requirements of doctors. It makes very sensible reading. I wonder whether the Minister can say something about the Government’s intentions on this and especially about the role of Health Education England. I draw his attention particularly to the fact that we need more doctors who are capable of providing general care in broad specialties across a range of different settings. The report states that this is being driven by a growing number of people with multiple co-morbidities, an ageing population, health inequalities and increasing patient expectations.
	The Minister will recollect the work of the Royal College of Physicians on the new hospital, where it made the point that alongside specialists we need
	generalists who can co-ordinate care. Does the Minister think that that ought to be incorporated in the future training of our doctors? By definition, or certainly by implication, that means that greater prestige needs to be given to generalist doctors alongside the highly specialised ones.
	I have also had the benefit of discussions with Dr Kieran Walsh of the BMJ in relation to medical education. The key point that he has put to me is that we need to look at inter-professional education. Healthcare professionals no longer work in silos, but in teams, but healthcare professional education still occurs mainly in silos. Again, are the Government working through Health Education England to do something about that?
	I have had further discussions with Professor Stuart Carney, the dean of medical education at King’s College, concerning continuing professional development. As the Minister knows, this was introduced into the National Health Service some years ago but subsequently, of course, the revalidation of doctors was also introduced. Is he able to say something about the initial outcome of revalidation? There is a worry that both continuing professional development and revalidation can become a tick-box exercise rather than a focused approach to improving and enhancing the quality of medical practice. Perhaps he could say something about that. Again, that relates back to the Shape of Training report.
	The fourth point I would like to raise is about the use of e-technology and simulation and how we can harness new technologies in the development of medical competence and skills. The Minister will know that around the country there are a number of simulation centres where doctors and other clinicians can take part in sessions that are designed to simulate clinical practice. That enables trainers to put doctors and other clinicians under pressure to see how they react when faced with multiple pressures at the same time. The problem is that it is all very voluntary at the moment. Can we look forward to a time when we can expect simulation training and regular updates to be a mandatory part of the life of doctors?
	My fifth point is an issue that I have raised and discussed with the Minister on many occasions. In this country we have first-rate life sciences. We have a fantastic medical health technology and devices industry, but we know that the NHS is very slow to adopt new medicines and new techniques even though they have been proven to work. Will the Minister say a little bit about how we can encourage the NHS to move to adoption much more quickly? Can we use the new PPRS agreement on drug costs, for instance, as a way of incentivising the adoption of new medicines?
	Finally, my noble friend Lord Turnberg asked about medical negligence. The Minister will know that there is an alarming rise in the payout of claims, which is probably unsustainable going forward. I cannot believe that the quality of medical practice is getting worse. It is something to do with the number of claimants and the action of the courts. I know that the medical defence organisations are very concerned, as well as the NHS Litigation Authority. In the short time that is available, is he able to say that this is something that the Government are at least keeping under review?

Earl Howe: My Lords, in thanking the noble Lord, Lord Parekh, for bringing this topic to the House and for his very constructive and thoughtful speech, I would like to begin on the subject of medical education.
	I am sure all noble Lords will agree that medical education in this country is of the highest quality. Indeed, our medical schools rank in the top 10 in the world. But it is not just formal education at university that contributes to maintaining and improving the skill of clinicians in the NHS, as the noble Lord, Lord Turnberg, reminded us. High-quality postgraduate education, continuing professional development, appropriate regulation, the development and dissemination of best practice, the uptake of innovation, and, as the noble Lord, Lord Parekh, emphasised, transparency in the performance of clinicians all contribute to delivering high-quality patient care.
	With regard to regulation, the General Medical Council—GMC—is required to evaluate the fitness to practise of all doctors holding a licence to practise medicine in the UK. Medical revalidation, which was raised by the noble Lord, Lord Hunt, commenced on 3 December 2012 and is the process by which the GMC will make an evaluation to renew a doctor’s licence. Doctors are required to revalidate every five years by participation in local schemes of appraisals which are based on the GMC’s core guidance for the medical profession, Good Medical Practice. Areas of concern will be discussed at appraisal and plans agreed to undertake further development to tackle those concerns. These remedial activities are overseen by a senior doctor to ensure an effective outcome.
	Revalidation provides the reassurance that all doctors, including locums and doctors in private practice, are engaged in a process of structured appraisal and professional development that will provide the framework for continuously improving the quality of their practice. Medical revalidation will help doctors keep up to the standard expected of them by ensuring that they stay up to date with the latest techniques, technologies and research. The regular feedback from patients and colleagues will highlight areas for improvement and help a doctor to tackle any concerns about important skills such as bedside manner and maintaining trust with patients. Where concerns about doctors are more serious or attempts to tackle them are not successful, as the noble Lord, Lord Turnberg, alluded to, a doctor may be referred to the GMC fitness-to-practise process, where a full investigation will be made that may result in sanctions or removal from the medical register.
	I was very struck by the phrase used by the noble Countess, Lady Mar, about the notice that she saw: “One complaint at a time”. In this context, the noble Lord, Lord Hunt, mentioned the Shape of Training report. One of the key themes of Professor Sir David Greenaway’s report was the balance between specialists and generalists in the medical workforce. I can say at this point that the four UK Health Ministers will consider the draft policy proposals early this year.
	The noble Lord, Lord Turnberg, mentioned doctors from the EEA. We welcome the agreement to modernise the professional qualifications directive. The revised
	directive will now make it easier for professionals to work anywhere in the EU but we have pushed hard for more transparency in regulated professions across member states to ease the requirements on skilled professionals finding jobs in the EU. We also have a duty to play our part as a department in the furthering of the UK’s wider aims in Europe, such as freedom of movement. To that end, we are also keen to ensure that highly skilled professionals do not face unnecessary or disproportionate barriers when moving to the UK.
	My noble friend Lord Bridgeman focused on language skills, which, as he said, are also a key part of ensuring that doctors in the NHS are able to care properly for and communicate with patients. That is why we made changes to the Medical Act in 2014 which allow the GMC to refuse a licence to practise in circumstances where a medical practitioner from within the EU is unable to demonstrate the necessary knowledge of English. Furthermore, an additional fitness-to-practise category of impairment was created relating to language competence. These powers help to ensure patient safety and strengthen the GMC’s ability to take fitness-to-practise action where concerns are identified. Doctors from outside the EU are already subject to systematic language checks prior to registration with the GMC. These powers ensure that only doctors with the necessary language competence are given a licence to practise in the UK.
	My noble friend referred to other healthcare professionals. As he mentioned, the department has consulted on proposals to give powers to the Nursing and Midwifery Council, the General Pharmaceutical Council, the Pharmaceutical Society of Northern Ireland and the General Dental Council to carry out proportionate language controls for EEA applicants similar to those given to the GMC. The consultation ended on 15 December 2014 and a government response will be published shortly.
	The content and standard of formal medical education and training are the responsibility of the GMC, which has the general function of promoting high standards of education and ensuring that medical students and newly qualified doctors are equipped with the knowledge, skills and attitudes essential for professional practice. Medical schools also play a key role in medical education and training. They design curricula for undergraduate medical education, including the type of placements students may undertake during the course. The royal colleges also play a vital role in postgraduate specialty training. They develop postgraduate curricula, provide advice to postgraduate deaneries on the quality management of training as part of the GMC’s quality framework, and provide continuing professional development opportunities for their members.
	The department set up Health Education England to deliver a better health and healthcare workforce for England. HEE does this in a number of ways: by commissioning training places to ensure delivery of the right number of medical staff for the future; working to influence the royal colleges and other professional bodies responsible for developing and approving formal training curricula to ensure they are appropriate; and ensuring professional and personal development does not end when formal training stops.
	The creation of HEE and its local education and training boards has given employers a stronger voice in workforce planning so that the education and training HEE commissions better reflect their needs and, therefore, the care they deliver to patients. The noble Countess, Lady Mar, will be interested to know that in 2014 we asked HEE, through its mandate, to work with the professional bodies and regulators to seek to include specific training in curricula where needed. Examples of this training include perinatal mental health training to support the health and well-being of women and their children during pregnancy and following the birth; compulsory work-based training modules in child health in GP training; care of young people with long-term conditions; and dementia education across a number of specialty areas.
	We also asked HEE to provide leadership and to work with the local education and training boards and healthcare providers to ensure that professional and personal development continues beyond the end of formal training. For example, HEE will work with other organisations to develop a bespoke training programme to allow GPs to develop a special interest in the care of young people with long-term conditions by September 2015.
	Clear outcomes and guidance also provide a focus for action and improvement for clinicians. Since 2010, the Department of Health has published outcomes frameworks for public health, adult social care and the NHS, which include the main outcomes that represent the issues across health and care that matter most. Combined with this, quality standards produced by the National Institute for Health and Care Excellence provide a clear description of what high-quality health and social care services look like, so that organisations can improve quality and achieve excellence.
	As my noble friend Lord Selsdon rightly said, and as the noble Lord, Lord Hunt, also pointed out, innovation within the NHS is also an important driver of improving the skills and knowledge of staff. We are working with key stakeholders to remove barriers and put in place incentives to accelerate the adoption of innovation at all levels in this complex system. In 2013, England became the first country in the world to implement a universal system of academic health science networks which act as system integrators to link all parts of the healthcare landscape with industry and academia. Through this network, innovations and best practice can be spread and disseminated.
	The noble Lord, Lord Hunt, referred to the use of technology in particular. The development of supportive tools for clinicians is an example of how innovation can be used to deliver improved patient care. The noble Lord mentioned others and I will get back to him on the specific examples that he gave if I can get further information on them. Macmillan Cancer Support, which is part-funded by the Department of Health, has developed an electronic cancer decision tool which is currently installed in over 1,000 GP practices across the UK, with plans to make it available to all GPs as part of their standard software. In answer to the noble Lord, Lord Parekh, we recognise the hard work and the vital job that GPs do, and we are doing our best to free them from excessive box-ticking so they have more time to devote to patient care.
	Finally, to address one particular point made by the noble Lord, Lord Parekh, the Government’s commitment to transparency has seen, among other things, consultant-level outcomes data published for 11 specialties on the My NHS website. It has also seen the Care Quality Commission publish the findings from its first comprehensive inspection of NHS GP out-of-hours services. More generally, transparency in public services and access to open data are key government policies, and I would be happy to expand on that in writing to the noble Lord.
	The Government’s response to Robert Francis’s public inquiry into Mid Staffordshire NHS Foundation Trust also set out our commitment to creating a culture of openness, candour, learning and accountability in an NHS which puts compassion at its heart. As noble Lords can see, the Government are undertaking a great many things to ensure that the medical competence of staff in the NHS is not only maintained, but is improved where needed.
	Sitting suspended.

Pension Schemes Bill
	 — 
	Committee (1st Day) (Continued)

Amendment 22
	 Moved by Lord German
	22: After Clause 38, insert the following new Clause—
	“Disclosure of information about schemes: duties on trustees and managers
	(1) The Pension Schemes Act 1993 is amended as follows.
	(2) In section 113 (disclosure of information about schemes to members etc), after subsection (10) insert—
	“(11) The trustees or managers of an occupational pension scheme and the managers of a personal pension scheme shall be under a general requirement to account to their beneficiaries for all actions taken in the performance of their investment functions, including (without limitation) actions relating to any of the matters mentioned in subsection (15), and shall also be under a general requirement to act transparently in that regard.
	(12) The trustees or managers of an occupational pension scheme and the managers of a personal pension scheme shall comply with any reasonable request for information relating to any of the matters mentioned in subsection (15) where such request is made by or on behalf of one or more of the beneficiaries, or any other persons of a prescribed description which the Secretary of State may specify in regulations under this section, or by a relevant independent governance committee.
	(13) The trustees or managers of an occupational pension scheme and the managers of a personal pension scheme shall comply with any reasonable request by or on behalf of any of the persons specified in subsection (12) for information relating to the reasons for the manner in which they have exercised or are proposing to exercise a discretion in relation to any of the matters mentioned in subsection (15).
	(14) The trustees or managers of an occupational pension scheme and the managers of a personal pension scheme shall take all reasonable steps to ensure that all persons to whom they have delegated any investment functions mentioned in subsection (15) comply with any reasonable requests by or on behalf of any of the persons specified in subsection (12) for information relating to the performance of such delegated functions.
	(15) The matters mentioned in this subsection that are referred to in subsections (11) to (14) are—
	(a) the selection, retention and realisation of investments,
	(b) the stewardship of investments, including (without limitation)—
	(i) the exercise of rights, including voting rights, and
	(ii) the engagement with the managers of investee companies and other investee entities in relation to (among other matters) corporate governance (including management remuneration) and corporate actions,
	(c) the selection, appointment and monitoring of investment managers and other agents to whom the trustees or managers delegate any of the matters mentioned in paragraphs (a) and (b) above, and
	(d) the selection and monitoring of investment funds which are operated by insurance companies or other institutions and in which the trustees or managers have invested or are considering investing.
	(16) For the purposes of subsections (11) to (15), a request for information shall be presumed to be reasonable unless—
	(a) the requested information has already been supplied to the person making the request within twelve months before the date of the request,
	(b) the requested information is otherwise readily and freely available in easily comprehensible form to the person making the request and that person has been advised accordingly,
	(c) the trustees or managers (or, where subsection (14) applies, the relevant delegate) reasonably consider that the costs of providing the information would be disproportionate, having regard to (among other matters)—and have stated that to be their view, have explained their reasons, and have given their best estimate of such costs to the person making the request.
	(i) in the case of an occupational pension scheme, the best interests of the beneficiaries as a whole,
	(ii) in the case of a personal pension scheme, the best interests of the beneficiaries of all personal pension schemes of the same provider as a whole, and
	(iii) whether the requested information is relevant to those best interests,
	and have stated that to be their view, have explained their reasons, and have given their best estimate of such costs to the person making the request.
	(17) Subsection (16)(c) above shall not apply unless where a relevant independent governance committee, having considered such view and reasons—
	(a) notifies the trustees or managers that it does not agree that their estimated costs would be disproportionate, or
	(b) there are commercial considerations, including (without limitation) confidentiality constraints, that, for so long as such considerations subsist, would make it either unlawful or not in the best interests of the relevant beneficiaries for the requested information to be provided,
	and the trustees or managers (or, where subsection (14) applies, the relevant delegate) have stated that to be their view and, so far as practicable, have indicated the nature of the relevant considerations to the person making the request.
	(18) Subsection (17) shall not apply to the extent (if any) that it is reasonably practicable for any part of the requested information to be provided, whether in full or in a redacted or summary form, without prejudice to such commercial consideration.
	(19) The provision of information under subsections (11) to (15) shall be made without any—
	(a) cost or charge to the beneficiary or any other prescribed person making the request, or
	(b) restrictions on the use or dissemination of the information by the recipient.
	(20) The Secretary of State may make regulations with a view to ensuring that the information disclosed under subsections (11) to (15) is provided in a timely and comprehensible manner.
	(21) For the purposes of subsections (11) to (20)—
	“beneficiaries” means the persons for whose benefit investments are being, will be or may be applied for the purposes of a pension scheme, whatever the particular form of ownership under which such investments are held for the time being,
	“commercial considerations” does not include any contractual provision purporting to exclude or restrict the right of the trustees or managers of a pension scheme to disclose to their beneficiaries the terms of appointment of any person to whom they have delegated any investment functions,
	“investments” means investments in relation to which any investment functions are performed,
	“relevant independent governance committee” means, in relation to a personal pension scheme that is included in a workplace pensions arrangement, a committee established by the provider of the personal pension scheme to oversee the affairs of the arrangement in the interests of the beneficiaries.””

Lord German: My Lords, I am pleased to move Amendment 22, standing in my name and those of the noble Lords, Lord Stoneham and Lord Paddick, and the noble Baroness, Lady Bakewell. The amendment follows the theme of this Government’s action in pensions by empowering savers and giving them choice.
	I make no apology for tabling a comprehensive and detailed amendment. It is intended to demonstrate the breadth of action required in legislation to achieve a high level of transparency in the operation of pension schemes. I am indebted to ShareAction, a charity dedicated to this aim, for its help and its research.
	The amendment provides a general requirement for pension schemes to account to savers for their investment and stewardship decisions; and a right for savers to access meaningful information about how their money is being invested and managed. It is an attempt to set a standard—a floor—guaranteeing savers rights to certain information about how their money is used. In doing so, it aims to rebuild the trust currently lacking between savers and those managing their money.
	The pensions sector is not a perfect market: most savers do not actively choose their pension provider; it is chosen by their employer. Historically, there has been very little switching between products, and by the time poor performance is apparent, usually at the end of the saver’s working life, it is too late for the saver to act in a way to send a signal to the market. Savers feel disconnected from their money and this exacerbates these market imperfections. A disconnected saver is less likely to scrutinise the way in which his or her money is used. The buyer side of the market will continue to be weak, providing no real scrutiny of the industry. We have seen the impact that this has had on the fees and charges that people’s pensions have been subjected to.
	The report of the now noble Lord, Lord Myners, in 2001 observed that good governance and accountability are mutually reinforcing. I agree. The pensions sector may never be dominated by a majority of active and engaged savers but, the more savers are active and informed, the better the market will work.
	Under the current system, savers have relatively few rights to information about their money. This is partly a result of outdated legal concepts. Much of pension
	law is based on laws that governed a world of private family trusts. More rules were designed for a world dominated by final salary pension schemes, a world that is fast diminishing.
	In today’s system, millions of people are automatically enrolled into defined contribution schemes, and now, potentially, into defined ambition schemes. Under these schemes, the saver takes the investment risk. It is therefore appropriate that such savers have rights to know how their money is being used—which answers the second of the two key questions which savers ask. The first is: “How much money will I get back?”. The second is: “Where does my money go?”.
	Currently UK pension schemes are subject to a number of disclosure requirements. However, these do not translate in practice into disclosure of information useful to the average saver. In summary, the current rules, depending on the nature of the scheme, require disclosure of a scheme’s investment policy and annual reports on investments, including high-level information on investment performance. In practice, savers are often sent information that is technical, inaccessible and does not show how high-level policies are enacted.
	The UK stewardship code is one mechanism that was designed for increasing transparency in the financial sector. The code covers issues such as how investors are engaging with companies and how they vote in investee companies. While the Financial Conduct Authority requires asset managers to disclose their commitment to the stewardship code, no equivalent requirement is placed on asset owners such as pension funds and insurance companies. Very few pension funds sign up to the code. This means that there is no real impetus for pension schemes to pass on to savers any information that may be disclosed to them by their asset managers. There is a missing link in the chain of accountability back to the ultimate saver.
	The rights created by this amendment would apply to all pension schemes. It encompasses the trustees or managers of occupational pension schemes and the managers of personal pension schemes. In summary, the amendment would place the trustees or managers under a general requirement to account to their beneficiaries for all actions taken in the performance of their investment functions and to act transparently in that regard. It would require trustees or managers to comply with any reasonable request for information —by “reasonable”, I mean not just that it should not involve disproportionate cost but where information is not more readily available—made by or on behalf of a beneficiary, including by an independent governance committee, about decisions being made in key four areas: first, the selection, retention and realisation of investments; secondly, the stewardship of investments; thirdly, the selection, appointment and monitoring of investment managers and other agents to whom powers are delegated; and, fourthly, the selection and monitoring of investment funds in which the trustees or managers have invested or are considering investing.
	Savers should have information to make informed decisions, and information to enable them to fully understand their own position. For example, we all know that when people have concerns about certain corporate practices, they may choose to alter the way in which they interact with those corporations.
	For example, after the Rana Plaza factory disaster in Bangladesh, many people chose to boycott companies that used the factory, and similar ones, to produce goods. Having taken this stance, many people would have been horrified to learn that the money they saved in their pension each month was actually invested in those companies. Another example is the fact that although many people are concerned about the health risks of smoking, those same people might well be surprised to find that a portion of their savings each month is being invested in tobacco companies.
	This amendment would plug that information gap. It would allow a saver to request information about whether their pension was invested in a particular company or industry sector. What can the saver do with this information? Under the terms of the amendment, they can ask their pension scheme what, if anything, it is doing to influence a company on a particular issue. If a saver is worried about excessive executive pay in companies, he or she can ask the pension fund how it voted in respect of pay packages in companies. If the scheme has done nothing in respect of the issue, perhaps by abstaining from voting or not engaging with a company about it, a dialogue has been started. The pension scheme trustees or managers may not agree that action is needed, but on the other hand they may agree. If other savers have approached them on the same issue, this may prompt them to review the stance, or lack of stance, they have so far taken, and to ask questions of the company or even to consider their exposure to the company—of course, being mindful of their fiduciary duties to their members. Thus, through empowering the saver, we have developed a mechanism for companies to be held to account that works with the market.
	This increased transparency would build on the work the Government have done to improve oversight of companies. The UK stewardship code has been adopted by the majority of asset managers, and it requires reporting on stewardship activities. It recognises that transparency is key to corporate accountability. But as I said earlier, the code has not been widely adopted by pension funds, and very few pension funds relay the information they receive from their managers to the ultimate saver. The amendment would allow a saver to receive this information on request. The release of such information to the saver would not mean that the saver would now move his or her money, as very few pension savers are realistically able to switch products. The effect is much subtler, but just as powerful. In a system where there is no real exit for the saver, the information has given him a voice.
	Parallels can be drawn with the move towards increased transparency on fees and charges in pension schemes. No one is suggesting that savers should not be given greater information on fees and charges applied to their pension savings because they cannot act on it. Instead it is recognised that there is a more subtle, wider benefit in this information being made public: pension providers may be held to account and savers may be better engaged with their savings.
	Transparency is a critical part of reconnecting savers with their savings. This amendment seeks to place in statute the actions needed to give effect to this very important principle. I beg to move.

Baroness Drake: My Lords, I am pleased to support Amendment 22, moved by the noble Lord, Lord German, and I commend him for tabling it. The thrust of the amendment is designed to achieve two things: to provide a lever for achieving greater engagement of savers with the investment of their savings, and to help correct failings in the pensions market where the demand side is so weak. It would do this by giving pension savers the right to ask for details on how their money is invested and managed; by compelling occupational and personal pension schemes and investment intermediaries to provide information; and by leveraging transparency to increase scrutiny over those who make the investment decisions.
	We know that pensions are not a normal market. Auto-enrolment is designed and built upon the principle of inertia, for a population of savers who do not engage. As the noble Lord said, savers do not choose a product; the employer does. The saver is restricted to a binary choice—to stay in, or to opt out and lose the employer contribution. Savers cannot easily move their pension savings.
	These features strengthen the importance of holding agents to account, because that very inertia allows conflicts of interest to flourish. It is difficult for savers on their own to secure improvements in transparency and accountability. The Government need to provide a legislative push. Saver disengagement is a concern for two reasons. First, it helps to feed serious market failings. Secondly, it undermines effective shareholder engagement with the governance of companies in which their money is invested.
	When auto-enrolment is bringing 10 million-plus new savers into the pensions system, the case for greater engagement and scrutiny becomes even more compelling. People avoid complexity but, as evidence from both the NAPF and ShareAction reveals, that does not mean they are not interested in what is happening to their money. They want their pension providers to invest in companies that behave well. Why should savers not know how their funds are engaging with companies on important issues, and how shareholder votes are cast at AGMs?
	Increasingly, shareholder responsibility is exercised through pension funds and investment intermediaries. We know from what happened in 2007 and 2008, and from the findings of the Kay review, that this model of shareholder engagement can be inefficient for the economy as a whole.
	Pension savers do not know how, if at all, their schemes are interacting with the companies in which they invest. As John Kay observed in his review of UK equity markets, such markets are no longer a significant source of new capital for businesses. Rather, their function is to allow savers to share in the success of business. The corporate governance function of shareholders is therefore not a sideshow but a core part of the purpose of modern equity markets. Increasing transparency, scrutiny and saver engagement is good for the saver, the pensions market and the efficiency of the economy.
	As a consequence of the Kay review, when seeking to clarify the fiduciary duties of trustees, the Law Commission confirmed that trustees can take into account non-financial factors such as improving members’
	quality of life. However, they can do so only if they meet two tests, one of which is that trustees should have good reason to think that scheme members would share the concern. Arguably, that assumes that there is some form of dialogue or engagement between funds and savers. That does not exist now and, given savers’ limited rights to information and the complexity of what they receive from schemes, the amendment would help to build up such engagement. Savers could ask how their money was invested and how rights attached to those investments were being exercised. Savers questioning funds will help to hold investment intermediaries to account and give funds a better idea of the view of their members.
	There will be those who argue that the amendment is just more red tape and will be too expensive, but I make several observations. As the noble Lord, Lord German, confirmed, UK pension schemes are already subject to a number of disclosure requirements, but they often result in very technical communications conveying little to the saver. Some pension schemes are seeking to raise their game in accounting for their decisions and in disclosing voting information, but too many are not. Trustees and managers should have a good knowledge of how investments are selected, stewarded and managed, including the exercise of voting rights. If they already have that knowledge—which they should to do their job well—it should not be too onerous to achieve a better and more informative set of communications to members. If schemes decide that they really want to communicate meaningfully with members and start to go about it in a systematic and committed way, the results can be significant without being onerous.
	The amendment, so clearly explained by the noble Lord, Lord German, puts a “reasonable” wrap around requests for information. Certain commercial considerations can be weighed in the balance when considering what is or is not reasonable—although I must say that that provision would be better placed in the general duty on trustees and managers rather than restricted to independent governance committees, but that is by the by; it is a detail. The amendment includes a proportionality provision, particularly in relation to costs of providing information in response to requests, and gives delegated powers to the Secretary of State to make regulations. Those regulations could make simple rules about the timeframe and format for disclosures, so the Secretary of State would have a great deal of discretion under the construction of the amendment as to how those regulations would be built.
	Not every pension saver would exercise their new rights, but all would benefit from the increased scrutiny by those who chose to do so. It is the release of relevant information that can raise the standard of scrutiny and accountability, not necessarily the volume of individual requests for that information. The very knowledge that occupational and personal pension schemes and investment intermediaries would be compelled to provide information in response to reasonable and proportionate requests should of itself raise the standard of practice among pension schemes as to what is readily provided in easily
	comprehensible form as a matter of course to scheme members. That is good for savers, and it is good for the economy.
	The amendment will not on its own secure the radical improvement in governance in the pensions industry which pension savers deserve, but it will certainly make a significant contribution.

Baroness Bakewell of Hardington Mandeville: My Lords, I, too, support Amendment 22. Savers’ distrust of the pensions industry threatens the success of automatic enrolment. It would be a great disappointment if people chose to save less or to opt out of pensions saving entirely because they have no confidence in those who are managing their money. One key mechanism for improving engagement and building public trust in pensions is increasing transparency, as has already been said. That means letting people know what is happening to their money and helping them to see how their retirement savings connect with the wider economy—not least through being invested in companies that they know well in their daily lives as consumers, employees and local residents.
	As well as supporting automatic enrolment, the rights proposed under this amendment would further the Government’s important work since the financial crash of 2008. The Kay review, commissioned by the Secretary of State for Business, Innovation and Skills, sets out a clear challenge to industry and to government to build a culture of trust and confidence within the investment sphere in order to counter the short-termist behaviour that contributed to the crash. Increasing the information that savers can obtain about their money will help to build this culture of trust. An important outcome of the Kay review was the Law Commission being asked to clarify the law around fiduciary duties in the investment sphere. In so doing, the Law Commission clarified that trustees can take into account non-financial factors if they have a good reason to think that the scheme members share a particular view and their decision does not,
	“risk … significant financial detriment to the fund”.
	Arguably, this assumes that trustees will have some sense of the views of scheme members and will engage in some sort of dialogue between savers and trustees. This cannot happen easily if savers continue to be cut off from important information about their money.
	Finally, enhanced accountability to shareholders has been a key plank of this Government’s work to promote more responsible corporate behaviour. We have seen this in the introduction of shareholder votes on executive pay. However, many of the largest shareholders in UK companies are pension funds and insurance companies holding money on behalf of ordinary savers. While shareholder votes may have increased accountability between companies and these institutional shareholders, there is no equivalent mechanism in place between these institutional shareholders and the savers. The amendment is a step towards bridging the gap between these institutions and the people whose money they hold. The rights created would increase the potential for scrutiny of their decisions. This is a logical continuation of the move towards greater corporate accountability.
	As my noble friend Lord German has said, the amendment covers four specific areas where transparency can be improved. First, there is the selection, retention and realisation of investments. In practice, a saver could ask his pension scheme what investments it holds in order to understand where his money is. That is key if the saver is to understand the risks to which his investment is exposed.
	Secondly, there is the stewardship of investments. Stewardship by shareholders plays an important role in ensuring the long-term success of a company. It involves responsible management of an investment in a company and taking an interest in how it performs in the long term, both financially and in areas beyond the financial. It can be contrasted with the type of short-termist trading of shares which led to the financial crisis. It is very important for pension savings that there is this type of long-term interest in companies, given the long time horizon over which pensions are saved.
	For institutional investors, such as pension funds, stewardship will cover practices such as exercising their rights to vote in companies and engaging with companies over corporate governance issues such as high pay and board diversity, and other corporate actions such as the use of sweatshops in their supply chains or the risks associated with expanding into emerging markets. A saver has an interest in knowing how, if at all, his pension scheme is influencing company practices. These practices have an impact on the value of his or her savings and on the way in which major companies influence the world in which he or she lives, and into which they hope to retire.
	Thirdly, there is the selection, appointment and monitoring of investment managers and other agents to whom the powers are delegated. This amendment recognises that trustees and managers often delegate their investment and stewardship power to other agents. This delegation does not absolve trustees or managers of responsibility for their agents’ activities. The ways in which agents are selected and the terms under which they are appointed and monitored are all-important. Where trustees or managers take stewardship and engagement with companies seriously, they will ensure that their agents take these issues seriously too. This will be reflected in the way that they choose and monitor managers and the mandates they give those agents.
	Fourthly, there is the selection and monitoring of investment funds which are operated by insurance companies or other institutions, and in which the trustees and managers have invested or are considering investing. The amendment also recognises that for insured schemes, the main investment function of the trustees or managers is the selection and monitoring of investment funds. For savers invested in these schemes, it will be important to know how trustees and managers understand the investments that they are making and whether they seek to exercise any direction over these funds.

Lord Bradley: Because of the lateness of the hour and the excellent way in which the amendment was introduced by the noble Lord, Lord German, and supported by my noble friend Lady Drake and the
	noble Baroness, Lady Bakewell, and as all the arguments have been clearly laid out, it would not be of any great benefit to the Committee if I tried to elaborate on this proposal. Suffice it to say that we would support any proposal such as this which improves transparency for the public.

Lord Bourne of Aberystwyth: My Lords, I thank noble Lords who participated in the debate on the amendment and my noble friend Lord German for moving the amendment so ably. The Government are committed to improving transparency in pension schemes and have a robust and thorough work programme during 2015 and 2016 to do so.
	My noble friend Lord German has raised a very important issue that this House has long recognised: the need for transparency in pension schemes. I assure noble Lords that this is an issue that the Government take very seriously. Indeed, in their publication Better Workplace Pensions: Putting Savers’ Interests First on 17 October 2014, the Government committed to improving the governance of workplace pensions and transparency surrounding the costs and charges which members are faced with, including better information about transaction costs related to buying and selling investments. I know that this amendment goes much beyond that but it indicates the direction of travel.
	Noble Lords will also be aware that this Government have recently consulted on draft legislation which, subject to parliamentary approval, will introduce from April this year new requirements on trustees to improve the governance of trust-based schemes. Trustees will be required to demonstrate that they have complied with new standards of governance by completing a statement, signed off by the chair of trustees, annually. Similar rules are to be introduced by the Financial Conduct Authority to require the newly formed independent governance committees to demonstrate that they have complied with such rules for the contract-based side of the workplace pensions market on a similar timescale. The Government intend to build on this first phase of transparency work. We are committed to consulting further, later this year, on how we propose to introduce transparency on additional costs and charges. The Financial Conduct Authority will also be consulting on similar new requirements in relation to workplace pensions.
	Regulations and rules made as a result of the Pensions Act 2014 will significantly improve the transparency of costs and charges in pension schemes and lead to members receiving better value for money. However, I recognise that the proposed amendment would go much further than this. It seeks to place requirements on trustees and managers of occupational and all other personal schemes to provide members with detailed additional information relating to their schemes’ investment functions, over and above what is already required, and additional to the improved transparency of costs and charges information that we intend to introduce from April. The amendment, were it to be accepted, would require trustees and managers to provide investment-related information to members on request where that is reasonable—and there is a rebuttable presumption that it is—which would be
	additional to existing requirements and would do so before we have consulted with the industry, savers and other interested stakeholders, as we announced we would in our
	Better Workplace Pensions
	consultation last October.
	We believe that there is merit in examining and considering further the requirements contained in this amendment. However, we consider that greater transparency in relation to costs and charges, as well as about how schemes manage their investments, go hand in hand. As such, they would be better considered together as part of the same well established transparency work programme, which is already under way and which we are committed to consult on later this year. To introduce additional but closely related disclosure requirements regarding investments into primary legislation in advance of the anticipated coming into force of the first phase of costs and charges disclosure in April, and to pre-empt the planned consultation on a further phase of transparency, risks introducing transparency in a piecemeal and unco-ordinated way, without the relevant guidance and optimal regulatory frameworks being in place to cope with such requirements.
	Existing primary legislation already provides the powers for making regulations along the lines suggested by the amendment. Those powers should not be duplicated in further primary legislation. Further, the Government are sympathetic to the need for greater transparency in this area, but this can be better achieved through secondary legislation under existing powers. Introducing these requirements through the amendment would remove the opportunity to consult all relevant stakeholders. Secondary legislation would, of course, require consultation. There is overlap and duplication between the suggested amendment and existing provision already contained in secondary legislation. To mitigate the risk of overlap and avoid unnecessary duplication of provision, we would wish fully to examine the suggested requirements in the proposed amendment against the full range of existing provision.
	As I have already mentioned, this could be more fully and carefully assessed by way of a consultation, involving both industry and stakeholders, which my right honourable friend the Minister for Pensions has already committed to hold later in 2015 in relation to trust-based pensions. This would allow the Government the opportunity to make the best assessment of what additional disclosure is needed with reference to a full range of views and evidence and to do this in conjunction with work for a further phase of enhanced charges and costs transparency. Any new requirements could then be introduced by way of amending or adding to existing provisions in secondary legislation.
	As I said, the Government have already committed to consulting on potential investment disclosure requirements for trust-based schemes. My right honourable friend the Minister for Pensions, when asked by an interested stakeholder about introducing further requirements, committed the Government to this approach. I restate that commitment, which the Government consider a vital part of our pensions reform. I therefore ask my noble friend Lord German to withdraw the amendment.

Lord German: I thank my noble friend the Minister for that detailed response. What I was particularly hoping to hear, as noble Lords may imagine, was where we are going next and what developments we can see being taken forward. If I may try to interpret what my noble friend the Minister has said, it is that we are moving forward on costs and charges and that is the direction of travel; that this is additional, although there may be some overlap with what is being proposed; and that at some stage in 2015 there will be a further consultation which will encompass many of these issues, including the issues raised by this amendment. If my interpretation of what was said is correct, that is fine; it seems to me to be an appropriate next step.
	The other area, of course, is about powers. My noble friend suggested that existing primary legislation already has these powers. I should be grateful if he could identify—he may want to do it by a note rather than by trying to give a detailed answer now—where those primary powers lie, under which Acts, so that we can be clear that they cover the range of activities we have been talking about today.
	I feel heartened that the Government realise that the costs and charges are a starting point in a much longer journey. I hope that today in your Lordships’ House represents one further step in taking this whole area of transparency further but with a conclusion in mind so that it is not too far away. On the basis that I look forward to the consultation later in the year and understanding how the powers are derived, I beg leave to withdraw the amendment.
	Amendment 22 withdrawn.
	Clauses 39 and 40 agreed.
	Schedule 1 agreed.
	Clauses 41 and 42 agreed.
	Clause 43: Power to create other exemptions from indexation
	Amendment 22A
	 Moved by Lord Holmes of Richmond
	22A: Clause 43, page 18, line 11, at end insert “, unless that pension (or that part of a pension) is a cash balance benefit within the meaning of section 51ZB of this Act.”

Lord Holmes of Richmond: My Lords, it is always a pleasure to speak about pensions. As we have heard today, the Bill provides an opportunity to discuss some really chunky issues in the arena of pensions in terms of guidance, trustee powers, investments and so on. It also gives us an opportunity to look at details and minutiae and perhaps, not to put it too bluntly, to clear some horsemeat out of the statutory food chain. I hope that that is what my amendments might achieve today.
	I shall focus on Clause 43 and the whole question of indexation and its inconsistent application to specific types of pension schemes. As you would imagine—it is to do with pensions, after all—it is complicated and
	detailed and makes your head hurt. I will not go into the minutiae today; if I may, I will write to the Minister with the detailed background to my amendment. Effectively, I would like to achieve consistency across the application of indexation to particular types of pension scheme. To give some history to this, the 1995 Act required certain occupational pension schemes to have indexation applied. Over the years the type of indexation has changed, but for the purpose of this debate we should just consider it to be limited price indexation, or LPI. The 2004 Act removed that obligation for money purchase schemes. The 2011 Act followed on by removing that obligation for cash balance pots. So far, so good.
	Unfortunately, there is what I would describe as quite a curious kicker in the 2011 Act: if you have a cash balance pot in a scheme that is contracted out, LPI increases will have to be applied to that, and a member will have to take LPI increases whether or not they want them. If I were a member in such a situation and I were contracted out, I would be forced to take limited price indexation increases, whether or not I wanted them. If I were contracted out for a period and then contracted back in, I would still be forced to take LPI increases, whether or not I wanted them.
	Perhaps even more curiously, if I were a member of the scheme, cash balance pot in hand, and I had never been contracted out, but another member, most likely unknown to me and potentially even at a different time from when I was a member of the scheme, was contracted out, I would still be forced to take LPI increases. Even more bizarrely, perhaps, if that member then left the scheme, transferred out or died, I would then get the opportunity to choose whether or not I wanted LPI increases. It seems curious that one’s decisions over one’s pension pot can be so influenced by an unknown other who just happens to have been a member of the scheme and contracted out at a particular time, and difficult to believe that this could ever have been the policy intention. It probably underscores yet again the point that pretty much anything to do with pensions is complicated.
	The complication is further added to because it is not possible to remove this horsemeat from the statutory process with regulations. It requires primary legislation. It is why, when Clause 43 was first proposed, there was—I would not go so far as to say excitement—a lot of interest in whether this clause would in fact close this loophole. It gets close but unfortunately again the problem comes whereby, for future cash balance pots, LPI will not have to be applied. Job done? Sadly not. It still leaves a toxic tail that any benefits or rights accrued between 1997 and whatever the commencement date of this Bill is still require LPI increases to be applied, whether the person wants them or not.
	On one level I am not suggesting that it is a bad thing of itself for people to have to take inflation-linked increasing annuities. Perhaps it is overly paternalistic to force this; certainly it is inconsistent when you look at the treatment of cash balance pots and money purchase benefits, when in many ways it is really difficult to get a cigarette paper between those benefits, but that is the case as it stands and is set out in Clause 43.
	So to my amendments. Amendment 22A would posit a regulatory-making power within the Act which would enable this to be put right. It would also give the space for people to consider whether there was potentially any sirloin within the horsemeat. I do not think there is. Others may, particularly if they focus on rights that have been achieved while that individual member was actually contracted out. I do not think that gets across the line. I think Amendment 22B is far more to the purpose, whereby a new Clause 43 would address this problem, not least through proposed new subsection (9), which would take us absolutely to these sunny uplands which everybody would desire where there is consistency across the treatment of benefits, whichever pot you may have—cash balance or money purchase.
	I considered tabling an Amendment 22C—it could best be described as the whole cash balance hog—whereby you would scrub out the end of new Section 51(5B)(c) and replace that with some wording which would in effect state that it was down to the member to choose, irrespective of their contracting out. It would be for the member to decide whether they wanted LPI increases on their pension pot at that point. This seems clear; this seems consistent. Perhaps, and this is the reason why I decided not to table the amendment, it may be too big a leap at this stage but I certainly urge my noble friend the Minister to strongly consider the amendments, not least Amendment 22B. We have had horsemeat; we have had a sliver—perhaps—of sirloin; we have had the whole cash balance hog, at which point I beg to move.

Lord Bourne of Aberystwyth: My Lords, first, I thank my noble friend Lord Holmes for sharing his concerns with us. He is very much the Desert Orchid of the Government Back Benches. He steered us to removing some horsemeat from the food chain in a typically earthy metaphor, although he got mixed up later with “sunny uplands”. However, I will do what I can.
	I confirm that the Government are aware of this issue, and we have some sympathy with the points that my noble friend made and the anomalies that he has highlighted. The requirement to index cash balance benefits was removed by the Pensions Act 2011, as he rightly stated, in response to representations from the pensions industry. It was pointed out that the requirement to index money purchase benefits was removed in 2005, and cash balance benefits are very similar in that entitlement is generally based on calculation of a lump sum rather than an income stream. Therefore it was a relatively easy decision to follow suit with cash balance benefits when the opportunity arose. However, the decision was made at that time that we would not disturb contracted-out schemes—they are subject to their own requirements. That was for very good and very technical reasons.
	We now accept that in theory that means that there could be members with rights to cash balance benefits that still have to be indexed, and that might be because another totally unconnected member has some contracted-out pension rights somewhere in the same
	scheme. That does seem odd, but to be honest we have not received any specific representations and we do not know of any particular case of concern. If the noble Lord can bring forward any specific examples of schemes or individuals who have suffered detriment as a result of this issue, it would clearly support the case for change that he has eloquently set out.
	We are aware that the Association of Pension Lawyers is also championing this issue but, as I say, until we know the size of the problem, or indeed if there is a problem in the sense of whether there are people suffering detriment, it is difficult to know how to deal with it and what form that action should take, whether it is through this legislation or elsewhere. We need to take account of the changes coming up in April because they will give members more say in how they spend their pension money, so some of the people caught in the situation at the moment could, arguably, decide to take a lump sum then reinvest that in an annuity without the indexation requirement, although admittedly, there will be problems with taxation at the highest level there, according to that particular taxpayer. As I said, if my noble friend Lord Holmes is able to come up with some specific examples of concern, I hope that we will be able to have a continuing dialogue with him and other noble Lords on this subject. However, in the mean time I respectfully ask him to withdraw his amendment.

Lord Holmes of Richmond: I am grateful to my noble friend for that response. I will be happy to provide some examples from my time in practice as a pensions lawyer—a number of examples immediately spring to mind. However, so as not to detain us this evening I will be happy to write to my noble friend with details of those.
	This is not the greatest issue on the planet and will not make a huge difference to pensions as we know them, but there are a significant number of situations where it bites and impacts. I cannot envisage a downside to making this change, which is not that tricky to bring about. It needs to be done through primary legislation and this is an ideal, opportune moment to do it.
	I accept the point on the changes this April, in that if members take pre-crystallised benefits there is a potential route around that. However, even taking that on board, there is still a significant enough issue that it is very much worth looking at this clause and what we might be able to do. I will be very happy to provide that information and to carry on the dialogue with my noble friend. At this stage, I beg leave to withdraw the amendment.
	Amendment 22A withdrawn.
	Amendment 22B not moved.
	Clause 43 agreed.
	Clause 44: Removal of requirement to maintain register of independent trustees
	Debate on whether Clause 44 should stand part of the Bill.

Lord McAvoy: My Lords, we have tabled a clause stand part debate to scrutinise the rationale behind Clause 44 and the likely cost savings estimated by the department. First, can the Minister provide a few examples—or even one example—of how the process for selecting trustees under Section 7 of the 1995 Act operates? It is my understanding that following the removal of the requirement to operate a register, the regulator will appoint trustees for a scheme that has suffered an insolvency through a flexible procurement panel. What is the typical cost of recruiting in this way rather than through a register of trustees and how does this compare to the cost of maintaining that register?
	In Committee in the other place the Minister discussed the Government’s Red Tape Challenge, specifically the desire to remove £2 million worth of regulation on businesses for every £1 million introduced. He also said that the savings that will be made by the Pensions Regulator will be passed on to pension schemes and then on to savers. We are therefore understandably keen to get an estimate of the windfall that awaits pension savers once this clause is passed. What is the saving for pension schemes and can the Minister say whether he can guarantee that this is passed to contributors?
	The clause stand part debate is intended to probe these details. I hope the Minister will be able to help in this way.

Lord Bourne of Aberystwyth: My Lords, I thank the noble Lord for his contribution to the debate. Clause 44 fulfils a government commitment which he outlined under the Red Tape Challenge to remove statutory requirements which are felt to be superfluous. This is such an example. He rightly set out that there is already an existing power for the Pensions Regulator to appoint trustees where he can appoint a trustee without reference to the register. Therefore, it would not seem to present a problem that the register goes. I will come back to that issue.
	I will clarify a point made by the noble Lord. The Minister who made the commitment about savings was the Pensions Minister in another place. I am sure that if he said it we can underline the commitment. It is not a statement that I or a Minister in the Lords made, but I am aware that any savings from this will be reinvested and we will confirm that in writing to the noble Lord. I understand that to be the position.
	I am happy to reassure the House that the regulator is committed to ensuring that any process to replace the register would provide the same level of assurance to members and schemes that an independent trustee appointed to a scheme is fit for the task. That, after all, is the paramount issue. The selection criteria would remain rigorous and transparent. The criteria and processes being published on the regulator’s website, along with the procedures for appointing and removing trustees, would be guaranteed. We will ensure that appointments will continue to deliver the best candidate for the job, given the specific circumstances of the scheme in question.
	I think there is little doubt that this register is superfluous and that there is the ability for the Pensions Regulator to draw on an existing pool of trustees without the need for the register. As the noble Lord,
	Lord McAvoy has highlighted, savings will be reinvested and I will confirm that in writing to him. On that basis, I ask that the clause should stand part of the Bill.
	Clause 44 agreed.
	Clause 45: Rules about modification of schemes
	Amendment 23
	 Moved by Lord Bourne of Aberystwyth
	23: Clause 45, page 19, line 10, at beginning insert “which is not a right or entitlement to collective benefits becoming, or”
	Amendment 23 agreed.
	Clause 45, as amended, agreed.
	Amendment 23A
	 Moved by Lord Bradley
	23A: After Clause 45, insert the following new Clause—
	“National Employment Savings Trust transfers
	In relation to the National Employment Savings Trust, within one month of the passing of this Act the Secretary of State must lift the ban on transfers and the contribution cap.”

Lord Bradley: My Lords, the amendment in my name and that of my noble friend Lord McAvoy would require the Government to lift the restrictions on the National Employment Savings Trust—or NEST, as it is commonly known—within one month of Royal Assent. This includes the ban on transfers and the contribution cap.
	The Government’s decision not to lift the contributions limit and bulk transfer restrictions on NEST until April 2017 or to lift the ban on individual transfers in and out until October 2015 is cause for real concern. In his Written Statement of 26 September, the Minister said that,
	“the European Commission has considered and approved the modifications to the State aid case for NEST”.—[ Official Report , 26/9/14; col. WS 167.]
	He can therefore see no barrier to lifting the restrictions that apply to NEST within the timescale set out in our amendment. Crucially, I believe it to be in the public interest for the Government to proceed in such a way.
	I cannot understand why the Minister is so reluctant to lift the restrictions. I will highlight all the positive statements made by the noble Lord, Lord Freud, in support of NEST. The noble Lord, Lord Freud, said, in a Written Statement on 26 September, that NEST has proved its value. It now has more than 1.5 million scheme members and works with about 9,000 employers. That number is rising. NEST provides a quality, low-cost pension scheme targeted at low to moderate earners and small employers. Its public service obligation ensures that NEST makes sure all employers are able to engage with their automatic enrolment obligations. On 18 November, the Minister reminded us:
	“From June 2015 1.2 million smaller employers—those with fewer than 50 workers—will start to engage with auto enrolment. NEST will be critical in ensuring that these small employers are able to access low-cost pension provision for their workers”.—[Official Report, 18/11/14; col. WS 13.]
	I think that all sides of the House agree with the Minister on the crucial role NEST has to play in its target market, and with the evidence that it is performing very well.
	It is worth expanding on the NEST success story. As the pensions industry acknowledges, NEST provides best practice standards, which have encouraged the insurance companies to improve their standards. It is low cost for employers and employees. It is simple and cheap to administer. It has high standards of governance. As NEST’s website proudly states, it has an “award-winning investment strategy”. Finally, NEST provides an excellent solution for employers with a high staff turnover, such as the catering and construction industries, because the pots remain and can be paid into by the next employer. Can the Minister confirm that he agrees with this analysis: that NEST has proved its effectiveness and worth? If he does, I fail to understand his reluctance to lift the restrictions.
	I agree that there was a good case for having restrictions before it was clear how the market would progress, but these restrictions are no longer justified. The auto-enrolment market is now well under way and NEST has not taken all the business, which had been a concern among some. We should therefore examine the impact of failing to lift the restrictions and caps within one month of Royal Assent, as our amendment suggests. The restrictions to date have meant that NEST has been able to get less of that low and medium-earning pension than it otherwise would have done. If this continues, the effect would be to contribute to the increase in the number of small, dormant pension pots. It may also miss out on the benefits of scale. We debated that earlier.
	Banning transfers in and out will be a problem for employers. The Department for Work and Pensions’ research found that more than 80% of employers want one provider. That makes sense: it reduces their administrative burden and means that they can provide their staff with pensions that are easier to understand. The ban means that employers who are thinking about using NEST but currently have a pension scheme of any type will be discouraged from using NEST because they cannot transfer in the pension assets in their current scheme. The Government purport to encourage employers to use NEST but, by refusing to lift the ban on transfers in and out right away, the effect is to discourage employers who currently have a scheme elsewhere.
	While the contribution limit will be lifted from 2017, retaining the income cap will discourage employers who have a broader salary range than low to middle income earners using NEST as they will have to administer two pension schemes. This may be a minority of employers, but it is an unnecessary restriction and one which we know employers will not like.
	We conclude, regretfully, that NEST is being disadvantaged against many of its market competitors, and we cannot understand why the Minister is doing
	this. The effect of the Government failing to lift the caps and restrictions in time for the remaining employers to establish auto-enrolment is to ensure that the restrictions on NEST remain until every employer has staged. Is it really the Government’s intention that by the time NEST restrictions are lifted auto-enrolment will be complete?
	The Minister should consider also the public interest obligations of NEST and the subsidy that it receives from the taxpayer. First, the caps and restrictions mean that NEST is disadvantage in competing for many of the low and medium-earning savers for whom it is designed. That may well result in customer detriment for many of those workers. Secondly, the Government’s proposals fail the public interest test. If large numbers of low and medium-earning employees cannot use NEST, it is being prevented from delivering its public interest obligation. Thirdly, restricting NEST impacts on its financial position and makes it harder to pay back the state aid earlier which would allow it to reduce its charges even further. This again undermines NEST’s public interest obligation and its mission to deliver low-charge, high-return pension provision.
	Finally, the rest of the industry is reported in the pensions press as increasingly not having the capacity or, possibly, the desire to cope with all the employers who are still to establish auto-enrolment. Smaller employers, often with low to medium-paid staff, are in this position. Having had, it is said, the advantage of the NEST restrictions in place while larger employers establish their auto-enrolment schemes, the big pension providers have recruited the profitable business. Perhaps the industry is less interested in the smaller end of the market, and thus the need for NEST is even greater.
	I am sure that the Minister will be able to explain why the Government have so far refused to lift the restrictions. I urge him to accept the amendment. If he cannot do so today, I hope he will take it away and reconsider before Report the strong case for the restrictions to be lifted not in a few years’ time but before auto-enrolment is complete. I beg to move.

Baroness Drake: My Lords, I do not want to spend too much time on this. Obviously I am not unfamiliar with the issue of NEST, and the restrictions on NEST. We are now in a position, in 2015, where the continued bans on the transfer into NEST are clearly to the detriment of pension savers. It will be increasingly difficult to mobilise the argument that continuing those bans is in the pension saver’s interest. It denies many people a good home for their legacy savings and is unquestionably increasing the proliferation of small pots, particularly in the SME community. One of the merits of NEST is that it would reduce the proliferation of small pots. It is not benefiting the employers any more, who want the flexibility to use NEST and bulk transfer the accrued pension savings of their existing employees or scheme members, which they are denied. As far as I can see, the main beneficiaries of the continued ban are still predominantly the private pension providers that benefit from restricting NEST’s market proposition.
	The Government have dealt with the EU state aid requirements, which no longer pose a barrier. The desire to get NEST to focus on a target market of
	small and medium-sized employers has been achieved. The auto-enrolment market is well under way. A cursory look at the figures will show that the private providers have secured a very large proportion of the new pension business, which is likely to grow. NEST is hardly tipping the market against them any more.
	It is difficult to see why the Government are taking so long to make a change that would benefit pension savers and, particularly, facilitate efficiency among the employers who are bearing the responsibility of having to establish workplace pensions and cannot pick up what may be a preferred position in NEST because they are left having to run an arrangement for the legacy savings of their existing scheme members or employees.

Lord Bourne of Aberystwyth: My Lords, I thank the noble Lord, Lord Bradley, for moving this amendment and the noble Baroness, Lady Drake, for her contribution. As noble Lords will be aware, NEST was established to support automatic enrolment by ensuring that all workers have access to a low-cost workplace pension scheme. Its design, including the annual contribution limit and transfer restrictions, focuses NEST on its target market of low to moderate earners and smaller employers who the market found difficult to serve. Since October 2012, when automatic enrolment began, NEST has fulfilled its role very successfully. I am happy to reinforce the statements made by my noble friend Lord Freud. We think that it has done an exceptional job. It already has more than 1.8 million members and 10,500 participating employers. NEST is doing what it was set up to do—supporting automatic enrolment.
	During the winter of 2012 and the spring of 2013, the Department for Work and Pensions undertook a call for evidence. This sought to assess whether there was evidence that the annual contribution limit and the transfer restrictions placed on NEST were preventing it serving the market that it was designed for. The evidence showed that these two constraints were not preventing NEST serving its target market. That said, the call for evidence revealed that the constraints were sometimes perceived as a barrier to using NEST. Smaller employers have limited experience of providing pensions for their workplace. A perception among smaller employers that using NEST is unduly complex could make choosing a scheme unnecessarily complicated. This could damage confidence in automatic enrolment and undermine its aims.
	With that in mind and taking account of the evidence, the Government determined that removing the annual contribution limit and the transfer restrictions that we are debating to address the perception of restriction would not be a proportionate response at the time, given the importance of the role that NEST was fulfilling in ensuring automatic enrolment. We conceived that to be its core function and where we thought that it should focus. We therefore concluded that legislation to remove the constraints in 2017 was a balanced approach. I think that it is scheduled to happen on 1 April 2017, which is some two years away.
	The noble Lord, Lord Bradley, raised the state aid situation. It is our understanding that we would have to reapply to vary the state aid consent that we have. Bearing in mind that it took us a year to get the original state aid clearance, that is clearly a significant period of time. We will double-check that in light of the comments made by the noble Lord, but I have had that confirmed while we have been debating this matter. We will reassess that, and I will write to the noble Lord and others who have contributed in the debate to confirm that position or otherwise.
	Therefore, we consider two issues to be at the forefront of this. The first is that we want NEST to fulfil its core function. We believe it is doing that very well and do not want to disturb that. The second is that 2017 is only two and a bit years away, and we believe it could take a significant amount of time to vary the state aid consent, but we will have another look at that issue. In the mean time, given that I have undertaken to examine that, I ask the noble Lord to withdraw the amendment.

Lord Bradley: Once again, I am grateful to the Minister for his response and that, if there is lack of clarity over the state aid issue, he will look at it and write to me about the actual position, so that we can apply it to the amendment. I hope that he will be able to do that before Report, so that we may consider whether it is appropriate to pursue the matter further. In the light of his assurances on that point, I beg leave to withdraw the amendment.
	Amendment 23A withdrawn.
	Clause 46 agreed.
	Schedule 2: Other amendments to do with Parts 1and 2
	Amendments 24 to 28
	 Moved by Lord Bourne of Aberystwyth
	24: Schedule 2, page 63, line 19, at end insert—
	“( ) in the substituted subsection (2)(a), for “hybrid scheme” substitute “shared risk scheme”;”
	25: Schedule 2, page 64, line 8, at end insert—
	“( ) For the definition of “defined benefits scheme” substitute—
	““defined benefits scheme” has the meaning given by section 2 of the Pension Schemes Act 2014;”.”
	26: Schedule 2, page 64, line 9, at end insert—
	“““collective benefit” has the meaning given by section 8 of the Pension Schemes Act 2014;””
	27: Schedule 2, page 64, leave out lines 10 and 11
	28: Schedule 2, page 64, leave out line 21
	Amendments 24 to 28 agreed.
	Schedule 2, as amended, agreed.
	House resumed.

House adjourned at 9.42 pm.